Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

MESSAGE FROM THE QUEEN

GRENADA (GIFT OF PRESIDING OFFICER'S CHAIR)

THE VICE-CHAMBERLAIN OF THE HOUSEHOLD (MR. JAMES HAMILTON) reported Her Majesty's Answer to the Address, as follows:

I have received your Address praying that I will give directions that there be presented on behalf of your House a gift of a Presiding Officer's Chair to the Houses of Parliament of Grenada and assuring me that your House will make good the expenses attending the same.

It gave me great pleasure to learn that your House desires to make such a presentation and I will gladly give directions for carrying your proposal into effect.

Oral Answers to Questions — ENVIRONMENT

Local Councillors (Attendance Allowance)

Mr. Cartwright: asked the Secretary of State for the Environment if he will now make a statement on the future of the attendance allowance system for local authority members.

The Under-Secretary of State for the Environment (Mr. Guy Barnett): I have nothing to add yet to the reply given to my hon. Friend on 5th May. I shall make a statement as soon as possible.

Mr. Cartwright: Does my hon. Friend accept that the attendance allowance system has caused bitter resentment, because it allows some people who have not lost a penny piece through their local

government service to claim substantial sums, whilst others who have to lose time from work are left substantially out of pocket? In those circumstances, will my hon. Friend persuade my right hon. Friend to publish the report of the joint working party with local government, which considered the problem? That report has been suppressed for the past year. Alternatively, will my hon. Friend set up an independent inquiry to look into the whole matter?

Mr. Barnett: I very much agree with what my hon. Friend said at the start of his supplementary question. The allowance system has thrown up many injustices and anomalies. For that reason my hon. Friend's suggestion of an independent inquiry will need to be examined.
My hon. Friend referred to the review that my predecessor undertook. It was not written with an eye to publication, but any further review would almost certainly include the evidence acquired as a consequence of that inquiry.
I have a great deal of sympathy with what my hon. Friend said, because undoubtedly some councillors—chairmen of committees, leaders, and so on—are doing a first-class, virtually full-time job for very little reward, while there are others for whom the allowance is possibly more than they need.

Mr. R. C. Mitchell: Will my hon. Friend have consultations with my right hon. Friend the Secretary of State for Social Services to ensure that a mayoral allowance for the performance of a mayor's civic duties is not regarded as income for calculating eligibility for unemployment allowance or social security benefits?

Mr. Barnett: My hon. Friend has referred to one of the grave anomalies that have cropped up. I could quote the example of the chairman of an important committee of a council who is similarly affected by the kind of problem that my hon. Friend raised. All these points are complex and difficult. That is why I welcome the suggestion made by my hon. Friend the Member for Woolwich, East (Mr. Cartwright).

Sir John Hall: The Minister referred to an investigation initiated by his predecessor. Can he not tell the House at


least what conclusions were reached, if he is not prepared to publish the report?

Mr. Barnett: I said earlier that the investigation was not conducted with the intention of publishing its results. It may be right for the evidence gathered as a result of that review to be used as part of a general review that we are now undertaking and that we shall later report to the House, or to make those facts and figures available to the sort of independent inquiry that has been suggested.

Local Authority Associations

Mr. Arthur Jones: asked the Secretary of State for the Environment when he next expects to meet members of the local authority associations.

The Secretary of State for the Environment (Mr. Peter Shore): On 2nd July.

Mr. Jones: Why did the right hon. Gentleman see only representatives from Socialist-controlled authorities at Transport House on 13th June about the possible overspending of about £400 million in the current financial year? What sanctions does the right hon. Gentleman propose against a local authority such as Haringey, which, it is reported, is likely to defy Government policy?

Mr. Shore: As to the first part of the hon. Gentleman's question, I made very clear the Government's general concern about the potential overspend when I met the consultative council, which consists of representatives of all the local authorities, regardless of political party. I met my own local government councillors because they happened in any event to be attending a conference in London that week, and I wished to have the opportunity of meeting them and talking to them. They are a thoroughly reasonable and responsible group of local government leaders.
While the hon. Gentleman's last point is a problem, I wish to wait until we have received the result of the further exercises and the financial returns on 16th July.

Mr. Cant: How does my right hon. Friend hope to get over the very difficult problem in relation to the rate support grant, whereby thrifty authorities such as Staffordshire County Council and Stoke

District Council will be discriminated against in this context?

Mr. Shore: I am aware of the great difficulties in dealing with problems of overspend. Should the overspend be confirmed, the problem as my hon. Friend puts it is that of treating fairly and justly different authorities. But the nature of the relationship between central and local government is such that it is extremely difficult, without changing the whole nature of that relationship, to do other than to accord rather rough justice.

Mr. Eldon Griffiths: Will the Secretary of State explain what he means by saying that certain local authorities are his? Did he not meet the authorities as Secretary of State? Are not all local authorities his clear responsibility? Surely he should not discriminate between one group and another. If some authorities defy the Government's request for economies and get away with it, does he agree that it will be difficult for other authorities to comply?

Mr. Shore: I am not sure whether the hon. Gentleman, in his slightly prolonged introduction to his supplementary question, was extending a careful invitation to me to address the Conservative Party local government representatives. If he was, I shall consider the matter with care. I shall not dismiss the idea. [Interruption.] I shall tell him why. It is because the evidence that I have of overspend is not confined to authorities under Labour control; it is a widespread tendency that is to be observed in councils throughout the land.
The hon. Gentleman's second question concerned some councils that may defy the Government. I am aware that some councils—this comes as no surprise to anyone who knows anything about local circumstances—have greater difficulties than others.

Mr. Ron Thomas: Is my right hon. Friend aware that many of his hon. Friends are concerned about the cuts in local authority expenditure? We believe that they will hit those least able to look after themselves or help themselves. As an ex-member of a local authority, I was never quite clear what sort of statistical indicator the Government use to determine whether there has been an increase in real terms. Many of us who


have sat on local authorities have found that there has been no increase in real terms. Those who have suggested to the working people that we represent that the party is over should realise that the pubs have not even opened for the party to begin.

Mr. Shore: As regards my hon. Friend's last point, I cannot be asked to comment on particular choices of words. I accept that statistical indicators are extremely important. One of the things that have struck me as an incoming Secretary of State for the Environment is, in a sense, the relative paucity of information that comes to central Government from local government. In the circular that I addressed to all authorities I carefully made the point that in our view there was almost certainly an element of genuine uncertainty in the figures which, with the best endeavours, CIPFA and the Department of the Environment had jointly obtained, and which were presented to the consultative council in May.
I understand the local authorities concern, and their difficulties, but I must correct my hon. Friend on one matter. My circular does not ask local authorities to make cuts; it asks them to live up to the figures that they themselves agreed were right and appropriate in December 1975.

Mr. Raison: My hon. Friend the Member for Bury St. Edmunds (Mr. Griffiths) asked a serious question, which deserved a serious answer. In view of the existing overspending and the increasing signs of further public expenditure cuts, will the right hon. Gentleman now consider giving further advice to local authorities about which services they must curtail?

Mr. Shore: I am interested to note the hon. Gentleman's approach to the problem of the relationship between national Government and local government in this difficult matter. I hope that in the context of the Layfield Report the whole House will be thinking very hard about what the right relationship should be, but I am not prepared at present to add anything to the circular that I have issued. I am not prepared to say anything before I have received the results of the additional information for which I have asked.

Rent Act 1974 (Survey)

Peter Bottomley: asked the Secretary of State for the Environment whether he will publish the results of the survey he has commissioned into the effects of the Rent Act 1974 in London.

The Under-Secretary of State for the Environment (Mr. Ernest Armstrong): The results should be available by the end of the year. The form and timing of their publication will be decided then.

Mr. Bottomley: Do the Government accept that there is urgent need for action? Will the hon. Gentleman do slightly better than saying that we have to wait for at least another six months or nine months after the two years since the Rent Act came into force?

Mr. Armstrong: As the hon. Gentleman knows, we have instituted a fuller review of the Rent Act. However, there is no need for urgent action. The view that the Act has caused the drying up of rented accommodation is not borne out by the evidence that we have received.

Mr. Baker: Does the hon. Gentleman agree that in central London the effect of the Act is sharply to reduce the number of furnished lettings available? Does he further agree that the Government should be encouraging the schemes put forward by some of us for short-term teases, and the proposal of the Westminster City Council for short-term council leases? The casual and complacent attitude of the Government, which suggests that there is no problem, is not acceptable.

Mr. Armstrong: I did not say that there was not a problem, but I remind the House of the great reduction that has taken place in homelessness as a result of evictions, and in the number of people facing eviction from their dwellings. That has to be balanced against—[Interruption.] The evidence from voluntary bodies is that there has been a great reduction in stress and a great reduction in the numbers concerned. We are giving every attention to this problem.

House Building

Mr. Skinner: asked the Secretary of State for the Environment what are the


most recent house building figures both in the public and private sectors.

Mr. Shore: House building figures for the period January to April 1976 show that in the public sector starts were up by 23 per cent. on the same period of 1975 and completions by 11 per cent. On the same comparison in the private sector, starts and completions were up by 22 per cent. and 6 per cent., respectively. This is encouraging progress and indicates that the improvement we achieved last year is being maintained.

Mr. Skinner: Does my right hon. Friend agree that the figures are a far cry from the halcyon days in 1968, when we built the record total of 413,000 houses? Does he further agree that the £175 million planned reduction for the current financial year, according to the White Paper, is now showing the first signs of its effect in terms of the reduced number of houses being built? Is it not ironical that this is happening in a week in which the IMF bosses and the United States bankers are prevailing upon the Chancellor of the Exchequer to spend even less money this year, next year and the year after, which will result in even fewer houses being built for the homeless when we have bricklayers on the dole?

Mr. Shore: Although in numerical terms we are a long way from what my hon. Friend described as the halcyon days of 1968, when I think we achieved the record post-war target for new house building, the figures show a situation far distant from the abysmal state of the housing programme that was reached in the last year of the Conservative Government. I do not under-estimate the importance of new house building in any sense, but in the 1970s, as opposed to the 1960s, we should consider the total provision for housing, including, for example, a proper emphasis on renovating and improving houses just as much as the building of new houses.

Mr. Michael Latham: Will the right hon. Gentleman now give the figures that he did not give a moment ago? Does he agree that public sector housing starts between February and April of this year fell by 12 per cent. compared with the previous three months?

Mr. Shore: I do not think that that is right. Further, if it is right, too much

importance should not be attached to it. As one who has spent a very long time dealing with statistics in different Departments, I learned a long time ago that one must look sensibly and realistically at trends. The more significant fact is that over the period concerned, compared with the same period last year, there is this very obvious and welcome improvement.

Mr. Hardy: My right hon. Friend gave the latest figures in comparison with the position a year ago. Will he publish in the Official Report a comparison of the latest figures with those which were available when the present Government took office in March 1974? Further, will he comment on the fact that the Conservative Party housing policies seem to threaten a very disastrous slow-down in house building and perhaps even in house improvement?

Mr. Shore: I shall certainly do my best to oblige my hon. Friend by making available the information for which he asks in the first part of his question.
On the second part, during the period that preceded the recent local authority elections, there was a very conspicuous absentee item from the Opposition Front Bench propaganda, in that its Members had virtually nothing to say about the necessity for improving the number of houses available.

Mr. Peter Walker: In view of the fact that there are 200,000 construction workers unemployed, will the Secretary of State say what stress he has placed upon house improvements, and whether this year he expects the number of house improvement grants to be one-third or one-quarter of what they were in 1973?

Mr. Shore: In that year, as the right hon. Gentleman will well recall, there was an enormous number of improvement grants, some of which, I think we would all agree, were necessary and valuable, but a great many of which, certainly in a period of public expenditure restraint, were very difficult to justify. We therefore very properly took measures to cut back on the lavish provision that was made not against any test of need but for people who wanted second homes and all kinds of things at that time.
I think that the present level of improvements is not entirely satisfactory, and if I can find ways of helping this


within the general context of the house building programme I shall be pleased to do so.

Mr. Thorne: How can the Secretary of State possibly justify cut-backs in housing construction, in the light of yearly statements at Labour Party jamborees about how Labour would really get to grips with Britain's housing problem?

Mr. Shore: My hon. Friend asks me how I can justify cut-backs in housing expenditure. Oddly enough, I have not had to make any justification of cut-backs in housing expenditure, first, because they have not been proposed and, secondly, because they have not taken place.

Mr. Rossi: With regard to the very selective figures that the Secretary of State chose to give the House a moment ago, is he not aware that his own Department, in its Press release, while stating that monthly figures are variable, said that special attention should be paid to quarterly figures, and that those quarterly figures show a 12 per cent. decline in public sector starts?
Why is the right hon. Gentleman so complacent about those figures? Does he not agree that the alibi given by his right hon. Friend the Minister for Housing and Construction—that this was due to Tory authorities coming into power—does not hold water, because this decline started three months before those elections?

Mr. Shore: The hon. Gentleman is getting a little over-excited about this. I find it very difficult to accept the allegation that my figures were selective. I was asked about the present state of play in recent house building. I gave the House the detailed figures for starts and completions for the first four months of this year. I am not sure what else I am expected to do. If hon. Gentlemen on the Opposition Benches want to put down more pertinent and relevant Questions, which may help their propaganda, they must do the necessary work to enable them to achieve this result. I do not accept the hon. Gentleman's criticisms. I have no reason to believe that any short-term decline has set in in relation to the trends of house building which I have already reported to the House.

M67 (Peak District National Park)

Mr. Hooley: asked the Secretary of State for the Environment if he will report on his conversations with the South Yorkshire County Council concerning the proposed motorway (M67) through the Peak District National Park.

The Minister for Transport (Dr. John Gilbert): My right hon. Friend has had no such specific conversations. When I met the county council in early April, the possibility of improving communications between Manchester and Sheffield was one of a number of subjects discussed. No conclusions were reached.

Mr. Hooley: I am very glad that no conclusions were reached, and also not entirely surprised, since there are sharp differences of opinion on the county council. Does my hon. Friend agree that he would not particularly want to enjoy the political notoriety of being the first Minister of Transport in 30 years to drive a motorway through a national park?

Dr. Gilbert: I assure my hon. Friend that I am seized of the political, environmental and economic considerations that surround this decision. I further assure him that no decision has yet been taken on the question whether a new road is needed at all, let alone the route, if it were to be decided to have a road.

Mr. Edwin Wainwright: Will my hon. Friend bear in mind that many people think that the present road system between Sheffield and Manchester is too dangerous for traffic to use? Will he therefore give further thought to the construction of a motorway between Sheffield and Manchester? When the road is being planned, will he make certain that there is a service station somewhere along it, so that people will be encouraged to drive to it and then go on planned routes around the moors, in order to see the beautiful countryside?

Dr. Gilbert: My hon. Friend's comments bear out those of my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) that there is considerable controversy attaching to this route. I am aware that some sections of it are particularly difficult, such as those around


Stocksbridge and Deepcar, which I visited in April. As my hon. Friends will appreciate, however, it is not sensible to consider separately certain elements of the route before arriving at a final view about the overall question.

Council House Rents

Mr. George Rodgers: asked the Secretary of State for the Environment how many local authorities with responsibility for public sector housing have announced rent increases that exceed the maximum indicated by the Government's guidance on rent charges.

Mr. Armstrong: Our guideline for this year sets no maximum, but recommends an increase of 60p a week averaged across the country. I understand that, so far, 122 local authorities in England have decided on increases exceeding 60p a week and 190 on increases of 60p or less, and that 55 have not yet decided.

Mr. Rodgers: Is my hon. Friend aware that many recently-elected Conservative authorities have indicated that it is their intention to impose substantial rent increases on council house tenants? Does this not make a mockery of the Government's anti-inflation strategy? Does my hon. Friend accept that there is general appreciation that by Government intervention the rate of interest charged to owner-occupiers has been controlled, and reduced in some cases? Will he extend this same protection to council house tenants?

Mr. Armstrong: We are, indeed, keeping under strict review the amount of rent increases, but I remind my hon. Friend that this Government restored to local authorities the right to fix their own rents and would be very reluctant to interfere with that.

Mr. Peter Bottomley: Does the Minister agree that these increases are indiscriminate when compared with those that would apply under the Housing Finance Act?

Mr. Armstrong: We have great faith in local authorities, who know their own circumstances, and it is for them to make the decisions.

Mr. Ovenden: Is my hon. Friend aware that some local authorities intend to save

most of their alleged overspending by cutting the rate contribution to the housing revenue account? Is he further aware that this will place the whole burden of sacrifice on one section of the community? Will he give some guidance to local authorities to prevent their acting in this manner?

Mr. Armstrong: Guidance has been given by my right hon. Friend. However, if my hon. Friend has any instances in mind and reports them to me, we shall consider them carefully.

Lorries (Speed Limits)

Mr. Gwilym Roberts: asked the Secretary of State for the Environment what study he has made of the accident saving which could be achieved by lowering the speed limit of heavy goods vehicles on motorways and dual carriageways to 50 m.p.h.

Dr. Gilbert: The speed of heavy goods vehicles on motorways is limited to 60 m.p.h. and their accident rate per mile travelled on those roads is less than half the rate on other roads. I have no evidence to suggest that there would be significant advantage in limiting their speed still further. On all other roads, including dual carriageways, they are already limited to 40 m.p.h.

Mr. Roberts: I believe that my hon. Friend is right. However, any hon. Member who drives on motorways will find his answer quite incredible. Will he discuss with the police forces methods of ensuring that speed limits come somewhere near being maintained? Does my hon. Friend accept that the relevant statistic is that a higher proportion of these heavy motor vehicles are involved in accidents compared with the ratio of heavy motor vehicles to other vehicles driven on motorways?

Dr. Gilbert: All that I can say is that the accident record of heavy goods vehicles is better than that of most other groups of vehicles, whether they are driven on motorways or on other types of road. I shall examine my hon. Friend's suggestion that I should have discussions with authorities about enforcement. However, my hon. Friend will have observed that the police are being equipped with a series of observation posts every three or four miles on all our main motorways,


and I have no doubt that these will have an effect in the direction which my hon. Friend desires.

Mr. Dykes: Widening the question slightly but, I hope, still remaining in order, may I ask the Minister to say whether he is concerned about the absence of flashing signals when drivers change lanes on motorways, especially the drivers of heavy vehicles, who hitherto have had a good reputation in this respect? Are many accidents caused by the failure to give proper flashing signals? My impression is that the frequency with which motorists give signals before changing lanes has declined recently.

Dr. Gilbert: I am not aware that there is any major problem of people failing to give signals when changing lanes on motorways. Certainly it is not reflected in correspondence that I have received. The accident rate for all types of vehicles per mile travelled is much lower on motorways than on any other type of road. Motorways are much the safest roads on which to travel.

Mr. Raphael Tuck: Does my hon. Friend realise that it is no use our passing laws unless effective measures are taken for their enforcement? Is he aware that when I travel on the M1 to my constituency there is always the risk of a by-election in Watford because lorries pass me at more than 60 m.p.h. and cars at about 110 m.p.h., and the police are sadly absent? What can the Government do about it?

Dr. Gilbert: I shall pass on my hon. Friend's comments to my right hon. Friend the Home Secretary, who is responsible, through the police forces, for the enforcement of the law. I take my hon. Friend's point that a certain number of citizens do not obey speed limits. I am afraid that that will always be the case.

Railways (West Country)

Mr. Walters: asked the Secretary of State for the Environment whether any proposals have been put to his Department regarding the closure of the main line to the West Country via Westbury and Exeter St. Davids.

Dr. Gilbert: No, Sir.

Mr. Walters: Will the Minister take this opportunity to refute categorically once and for all the rumours about the possibility of closing this major link to the West Country? Is he aware that such a closure would not only greatly damage transport to the West Country but would severely affect many important businesses in Wiltshire and acutely inconvenience very many people for whom this service is not a luxury but a necessity?

Dr. Gilbert: No one can give an unconditional guarantee lasting for eternity with respect to any stretch of railway line. However, my original answer should reassure the hon. Gentleman's constituents about the very important considerations that he has put before the House.

Tree Preservation Orders

Mr. David Mitchell: asked the Secretary of State for the Environment whether he is satisfied with the arrangements for the making of tree preservation orders; and, if not, what steps he is proposing to take.

The Minister of State for Sport and Recreation (Mr. Denis Howell): Where a direction of provisional confirmation has been made under Section 61 of the Town and Country Planning Act 1971 there are sometimes difficulties in ensuring that a decision is properly made before the direction lapses. I am currently investigating possible means of overcoming this problem and will write to the hon. Member.

Mr. Mitchell: That is not a very satisfactory situation. The position has been getting steadily worse for some time. Is the Minister aware that if the Secretary of State does not confirm an order within six months, when there is an objection, the trees can be felled? There have been two or three incidents in my constituency where orders have lapsed because of the failure of the Minister to deal with them, and the trees have been felled. What action does he propose to take to do something about this, instead of continuing to investigate it?

Mr. Howell: If the hon. Gentleman had listened to my original reply, I think that he would have found that it was more satisfactory than the situation about which he is rightly concerned. I have


announced that, because I think that it is unsatisfactory, I am looking into it and intend to take action to meet the very point about which he has expressed concern. The difficulty is that, within the six-month period, we find that many local authorities and many objectors who have to be written to drag their feet in letting us have their replies and, as a result, the six-month period lapses. I agree that that is unsatisfactory, and I intend to deal with it.

Mr. Stephen Ross: May I take this opportunity to draw attention to the large number of trees planted in the past two years which are unfortunately dying or are already dead? I think that the Minister's Department might be able to do something about this in drawing the attention of local authorities to the subsequent cultivation that these trees require—quite apart from publicising the vandalism that goes on—by means of television and the other media.

Mr. Howell: I am glad to say that more and more attention is being given to these matters, especially as a result of National Tree Week and the activities of the Tree Council, which receives full support from the Government and co-operates with us. What is more, right hon. and hon. Members on both sides of the House support this work. But I shall bear in mind what the hon. Gentleman said and see whether we can give any further information.

Dockland (Redevelopment Plan)

Mr. John Hunt: asked the Secretary of State for the Environment what financial support he is providing for the implementation of the redevelopment plan for London's Dockland, which has now been agreed by the joint committee of the five participating London boroughs and the Greater London Council; and if he will make a statement.

Mr. Shore: The Docklands Joint Committee has published its draft strategic plan for the redevelopment of the area as a basis for public consultation. It does not expect to take a final decision on it until next month.
I shall be making a statement about the strategic plan and its financial implications as soon as possible after it has

been agreed by the Docklands Joint Committee.

Mr. Hunt: How much longer will this go on? Is it not about time that the Government injected a sense of urgency into the redevelopment of London's decaying dockland? Will the Secretary of State explain what is the point of the Greater London Council and the inner London authorities seeking housing land in the outer London boroughs when they have 5,500 acres available for redevelopment on their doorsteps? Will the Minister also specifically say what is the Government''s position about the extension of the Underground railway system into Dockland? This seems to be an essential prerequisite for the viable redevelopment of Dockland, which should be got under way as urgently as possible.

Mr. Shore: As a member of a party which, when in government, presided over the dereliction of Dockland for three years while carrying out the abortive Travers Morgan studies, the hon. Gentleman has a great nerve to accuse us of being dilatory. The Docklands Joint Committee has only recently published its report. It is out for consultation, and all those interested have been asked to comment so that they can go firm on it by the middle of July. We shall respond to it as soon as it is before us.
Dealing with the one matter of substance about which the hon. Gentleman asked me, which was the transport strategy in Dockland's development, especially the Fleet and River lines, obviously I cannot respond in advance of my general consideration of the whole Dockland strategy.

Mr. Jay: Whatever painful economies have to be made in local authority expenditure, does my right hon. Friend agree that it would be a false economy to leave this valuable land unused for very much longer?

Mr. Shore: I wholly agree. There is here a major opportunity to contribute not only to the problems facing the hard-pressed boroughs which surround London's East End but to the solution of the general problems of the whole of our capital city. I am very anxious that we shall be able, in conjunction with the GLC and the local authorities, to proceed in our efforts to revitalise the area.

Mr. Arthur Jones: Are the Government making central funds available for the revitalisation of this vast area of central London? If a grant is to be made, will it be done on the basis of the present joint committee, or is the Government's mind still open on the question whether a development corporation would be a more suitable instrument?

Mr. Shore: I must tell the hon. Member that my mind is not open on a development corporation, if by this he means the kind of body that has been established to develop the various new towns surrounding our capital. I am not in favour of this, nor are the people in the area concerned. Dockland is part of the local authority areas concerned, and there is an intimate connection between these areas and their local authorities. I think it would be advisable for me to guard my response for the time being on the financial point.

Mr. Atkinson: Does my right hon. Friend not agree that the purpose of this question is that the hon. Member for Ravensbourne (Mr. Hunt) would prefer the working peasants to live in council houses in Dockland, and not occupy land in Bromley?

Mr. Shore: I am not sure what particular interest the hon. Member for Ravensbourne (Mr. Hunt) has, and it would be unwise for me to speculate on his motives, but his Question has given me the opportunity to make a statement of an interim character on Dockland, and I am grateful for that.

Motor Cars (Bumper Heights)

Sir J. Langford-Holt: asked the Secretary of State for the Environment what negotiations have taken place nationally and within the Common Market with a view to introducing standard heights for car bumpers; and whether he will make a statement.

Dr. Gilbert: Proposals for international standards for car bumpers, including their height, are being considered this week by the United Nations Economic Commission for Europe. Several European Community member States are taking part in this work. The Department is in touch with the Society of Motor Manufacturers and Traders Ltd. about

the British contribution to these discussions.

Sir J. Langford-Holt: I thank the Minister for appearing to take a slight step forward in this matter. Will he not accept that although international agreement is vital in the ultimate, it is not helped by our being at sixes and sevens in this country? In the absence of international agreement, we should now decide what standard heights we are to have in this country.

Dr. Gilbert: I disagree. I do not think that it is in anybody's interests to set a national standard which might have to be changed very shortly if we get an international agreement. That would be counter-productive. We need international agreement on a safe bumper height.

Local Government Finance (Consultative Council)

Mr. Arnold: asked the Secretary of State for the Environment whether he has discussed the Layfield Report with the Consultative Council on Local Government Finance; and, if so, what broad conclusions were reached.

Mr. Shore: Not yet. The council will be having a discussion on the report at its next meeting in early July.

Mr. Arnold: I recognise that the Secretary of State believes that a full and considered response to Layfield depends on the many submissions that he has asked people to make to him. However, will he say whether the Government are now in a position to give their views on certain matters within Layfield ahead of the consultation period, because it is essential that these matters should move ahead with all possible speed?

Mr. Shore: No, we are not ready to do that. There are certain matters in Layfield of a very specific nature on which more progress could be made in advance of coming to a conclusion on the big central question that Layfield poses.

Mr. Evelyn King: Does the right hon. Gentleman share the view expressed by the Home Secretary to the effect that in any democratic system expenditure by Government agencies should not exceed 60 per cent. of public expenditure? If


he does, does he not also agree that this implies a permanent limitation on local authority expenditure? Will he bear that in mind in any discussions he has on local government finance?

Mr. Shore: I do not subscribe to the doctrine of a particular percentage of public expenditure posing a threat to democracy.

Mr. King: But that is what the Home Secretary says.

Mr. Shore: That may be my right hon. Friend's view, and he is entitled to express it. I am equally entitled to express a different view. The Government view is that we should stick within the targets that we have agreed in the latest public expenditure White Paper.

Cesspits (Emptying Charges)

Mr. Shepherd: asked the Secretary of State for the Environment what advice he has given under the Water Charges Act 1976 to local authorities over charges for the emptying of cesspits and septic tanks.

Mr. Denis Howell: Local authorities have been asked to ensure that services that ought to be self-financing do not run at a loss. Many have thought it right to review their charges for emptying cesspools. I have received about 100 letters, mainly through hon. Members, complaining about the increases.
My Department has recently issued a consultation document on the water industry. The problem of sewage disposal from properties not connected to main sewerage is one of the issues on which views have been invited.

Mr. Shepherd: Will the Minister consider allowing regional water authorities to make a charge for the removal of sewage from properties that is based only on the rateable value and regardless of whether the property is served by main drainage, septic tank, or cesspool?

Mr. Howell: There is some confusion here. Responsibility for emptying cesspits rests with local authorities. Responsibility for the disposal of the matter emptied from the cesspits rests with the regional water authorities. Some interesting views are being put forward on this matter, one of which is that perhaps all the responsibility should be

taken over by the regional water authorities, which should empty the cesspits, dispose of the matter, and charge householders in the normal way. We want to hear the views of local authorities before commenting, but I must say that I am continually amazed by local authorities wanting to hang on to their responsibilities in this respect.

Mr. Madden: The regional water authorities were set up by the Conservative Party to supply water. Will the Minister relieve customers of charges for water supplies if the authorities are unable to supply water for long periods?

Mr. Howell: I do not think that that problem will arise.

Mr. Crawford: Will the Minister discuss with the Secretary of State for Scotland the possibility of introducing the more equitable system into Scotland that already prevails in England and Wales?

Mr. Howell: The Secretary of State for Scotland has been asking my advice on water reorganisation. I have told him to avoid like the plague the mechanism that the Conservative Party introduced when in Government.

British Railways Board (Finance)

Mr. Neubert: asked the Secretary of State for the Environment if he can now make a statement on the British Railways Board's accounts for 1975.

Dr. Gilbert: I have nothing to add to the answer that I gave to the hon. Member for Carshalton (Mr. Forman) on 26th May.

Mr. Neubert: Does the Minister agree that when the taxpayer picks up the tab for £324 million he is entitled to see that costs and overheads are cut to a minimum and that waste is eliminated? What action is the Minister taking to encourage that?

Dr. Gilbert: British Rail management is very well aware of the financial disciplines facing it. It is fighting a continuing battle to keep overheads down to the minimum practicable.

Mr. James Johnson: Last week in Hull there was a public meeting organised by Transport 2000, and anxiety was expressed about the possible closure of the


Hull to Scarborough line. How often does the Minister meet the Chairman of British Rail about a Beeching-type examination of the national network? In the event of this happening, is the Minister prepared to meet a delegation of Hull and East Yorkshire MPs on the matter?

Dr. Gilbert: I am always happy to meet delegations on this or any other matter. I have had no discussions with the present or future Chairman of British Rail about any Beeching-type of examination; nor do I propose to have one.

Mr. Fry: The accounts of British Rail totally fail to give any information that would enable Parliament to make a correct judgment of the loss incurred on the various services. Will the Minister accept that we need this information before any more subsidies can be granted?

Dr. Gilbert: I am sure that the hon. Member knows that the attempt to allocate revenue or cost was tried under the Cooper Brothers formula and proved so complex that it was abandoned because it had only limited practical value.

Mr. Cryer: Will my hon. Friend encourage British Rail to try to reduce the deficit by carrying freight traffic? Will he take up with British Rail its decision to end the carriage of livestock on 1st July which, although it causes a light ripple of laughter in the House, is worth about £2 million? Is he aware that many people such as pigeon fanciers will be denied a service that is very much appreciated and that uses trains that are running anyway? Should not we interfere with British Rail's decision, because it will cost the taxpayer another £2 million?

Dr. Gilbert: Representing as I do a strong pigeon-fancying area in the Black Country, I do not treat the decision by British Rail in this respect with any frivolity. I understand that it is being looked at, however, by the Central Council of the Transport Users' Consultative Committees. I am not sure whether its decision has yet been published, so I had better be careful about what I say at this stage. I know that it is fully aware of the many representations that have been received by myself and British Rail direct from many members of the public and hon. Members on both sides of the House.

Mr. Donald Stewart: Is the Minister aware that British Rail has published an order that it will not carry unaccompanied dogs after 1st July? Dog breeders in the north-east of Scotland say that this will mean the destruction of hundreds of pups and bitches within a few weeks of the decision being implemented. As British Rail intends to carry unaccompanied dogs for research purposes, the decision appears all the more objectionable. What action will the Minister take?

Dr. Gilbert: As I am sure the hon. Member appreciates, it is not for me to interfere in the day-to-day running of British Rail, but I do not seek to hide behind that on this occasion. The problem has arisen because British Rail, as a result of actions outside its control, has been faced with the decision by the House requiring that the carriage of livestock is undertaken with due regard to the humane treatment of that livestock. That is the situation that has produced the difficulty with which hon. Members have been faced in discussions with their constituents.

Mr. Raison: Has the Minister received any evidence from British Rail that it is doing anything about reducing its unauthorised freight deficit?

Dr. Gilbert: Yes.

Offshore Developments

Mr. Adley: asked the Secretary of State for the Environment if he is satisfied that he, or adjacent local authorities, possess adequate planning powers to control offshore developments which can have a noticeable effect on the relevant local environment; and if he will make a statement on recent proposals involving the parking of oil rigs in estuaries and other territorial waters.

Mr. Guy Barnett: I refer the hon. Member to the answer which I gave to the hon. Member for Isle of Wight (Mr. Ross) on 8th June.

Mr. Adley: There is a degree of muddle about the powers possessed by the Government and local authorities in territorial waters, in different stretches of those waters, and at different distances from the shore. Is the Minister aware that this muddle can be exploited for commercial ends by, for instance, people like those who wanted to park an oil


rig in the Solent? Will he look at the Coast Protection Act 1949 to see whether there is any possibility of an amendment to enable it to take account of environmental issues?

Mr. Barnett: I do not think that that Act is involved in this matter. My understanding of the situation is that the mooring of an oil rig between the three-mile limit and the mean high-tide mark is a matter for the Crown Estate Commissioners, who are entitled to take environmental factors into account, and the local planning authority concerned can contact them about that. The local planning authority can also exercise planning powers where the mooring of a rig involves construction over land. Anything on the shore, therefore, very often falls within the purview of a local planning authority. I am not at the moment aware of the muddle that the hon. Member refers to. I recognise that this is a new kind of situation. If the hon. Member has any evidence from his constituency or elsewhere I shall be glad to consider it.

Sir W. Elliott: Is the Minister aware that the parking of oil rigs in need of service or repair in the River Tyne would be most welcome, and might help to relieve the worst unemployment we have known in the North-East since the 1930s?

Mr. Barnett: I shall bear that in mind.

Building Societies Association

Mr. McCrindle: asked the Secretary of State for the Environment what recent discussions he has had with the Building Societies Association.

Mr. Shore: Regular contacts continue with the Building Societies Association. These have been built up over a number of years and enable discussion to take place over the full range of issues affecting the housing market.

Mr. McCrindle: Have any discussions taken place recently about the effect of abolishing or cutting back tax relief on mortgages for more expensive properties? Does the Secretary of State not agree that the log jam that would be likely to result from such a move would only lead to increased prices for the less expensive properties?

Mr. Shore: This matter has not been under current discussion, but if moves were made in any way to alter the tax arrangements affecting mortgages for the purchase of houses we would have consultations with the building societies.

Mr. Frank Allaun: Is the Secretary of State aware of the new and growing practice by many building societies of red-lining or blue-zoning the old inner city areas within which they refuse mortgages on all houses, even if they are not to be demolished? As local authorities, in contrast, provide mortgages for such houses, and particularly since the present £100 million scheme with the building societies is proving a deep disappointment, will my right hon. Friend require building societies to provide to the local authorities 10 per cent. of their advances for this purpose?

Mr. Shore: I am interested in both the questions that my hon. Friend puts. He follows these matters very closely. I shall be glad to hear any evidence on the question whether there is in practice a red-lining of the inner cities. That is a most important point, because we wish to get the maximum co-operation from the building societies in two respects—first, to increase their lending on older properties, and, second, to increase their lending to people with average or below-average incomes.
On my hon. Friend's second question, there is an encouraging trend in the figures for the first quarter of this year, which show that 26 per cent., by number, of new mortgages went to people whose income was below that of the average manual wage.

Mr. Sainsbury: Is the Secretary of State aware of the considerable problems caused in certain areas, of which my constituency is an example, by the restrictions placed on the amount of money available for local authority mortgages? Following his talks with the Building Societies Association, what information has he about the extent to which the building societies have been able to fill the gap left by those restrictions?

Mr. Shore: There was general agreement about the £100 million that the building societies were trying to make available in addition to their other lending in order to take up the reduction in


local authority lending enforced by the previous year's Public Expenditure Survey Committee, but the hon. Member must think carefully if he is urging me, on behalf of his constituents, to increase public spending and the public sector borrowing requirement—because that is the implication of his question.

Mr. George Cunningham: Is my right hon. Friend aware that if tax relief on mortgage interest were restricted to the basic rate there would be a saving of £80 million a year? Does he recollect that last year we were told that the relief would not be cut back in the Budget, because of a Department of the Environment reason relating to the building industry? Has the Department of the Environment this year opposed the restriction of that relief to income tax at the basic rate?

Mr. Shore: If there were to be a change in this area, of course it would require conversations with my right hon. Friend the Chancellor, and it would have to conform to the timing of whatever measures were put forward at the time of the next Finance Bill. Our consideration of the timetable is related much more to the housing finance review.

Mr. Budgen: Will the right hon. Gentleman confirm, in relation to one of his earlier answers, that he has no power to direct building societies to lend to any individuals or to any sector of the housing market?

Mr. Shore: I am not certain what my powers are in this respect, but now that the hon. Gentleman has put that question I shall inquire further. I think that by far the best way of proceeding, however, is by co-operation and good will between the Government and the building societies.

Mr. Dalyell: Has it occurred to my right hon. Friend that, if Opposition Members in the third row below the Gangway got their way and we had a £ Scots and a £ sterling, building societies would be faced with mind-boggling problems of disentanglement and extreme cases of difficulty when an English customer was based in Edinburgh or a Scottish customer in London, or elsewhere in England?

Mr. Shore: I agree with my hon. Friend that there are so many areas in which the Scottish, English and Welsh economies are interwoven that their separation would be so enormously complex and difficult as to be self-defeating, in terms of the objectives of those who advocate such a course.

Mr. Loyden: Is my right hon. Friend aware that there is positive evidence that discrimination is being exercised by building societies against certain areas? Is it not time that the Government took some control of building societies, in order to ensure that money is channelled to places where it is most needed?

Mr. Shore: I agree that it is terribly important to get as much building society money as possible into inner city areas, but we should have a basis of fact before we start drawing conclusions. If my hon. Friend has any additional information, I hope that he will send it to me.

Mr. Crawford: Is the right hon. Gentleman aware that the £ Scots with the basis of a healthy Scottish balance of payments—and our nation is now self-supporting in terms of oil—will be very much healthier than the English pound when we gain independence?

Mr. Shore: That question does not deserve a reply.

WATER SUPPLY

Mr. Michael Morris: I beg to ask leave to move the Adjournment of the House, under Standing Order No. 9, for the purpose of discussing a specific and important matter which should have urgent consideration, namely,
the water shortage in England and Wales".
You will be aware, Mr. Speaker, of the Private Notice Question I was granted on 3rd May. The Minister stated at that time that the problem was localised, but his assessment was subject to average rainfall this summer.

Mr. Speaker: Order. I rise for two reasons—first, to ensure that I hear the hon. Member and, secondly, to ask him to set a good example for future applications under Standing Order No. 9. I hope that he will merely state the facts and the grounds for urgency. Standing Order No. 9 applications are becoming


very much like Ten-Minute Bills, and that is not the intention of the Order. The hon. Gentleman has not been guilty. I am just making an appeal to him in time.

Mr. Morris: The specific nature of my request is that the water shortage is self-evident to us all. The importance is even more self-evident. The domestic consumer, industry, commerce and, not least, the production of food need water.
The urgency is paramount and dictated by the escalating scale of the problem, Only a few weeks ago, it was a localised problem, but yesterday, in answer to a parliamentary Question, I was told that there are now 26 drought orders affecting 17 counties—nearly one-third of the country. The public has a right to know that the Government are making urgent contingency plans to meet this shortage.

Mr. Speaker: The hon. Member for Northampton, South (Mr. Morris) asks leave to move the Adjournment of the House for the purpose of discussing a specific and important matter that he thinks should have urgent consideration, namely,
the water shortage in England and Wales".
As the House knows, under Standing Order No. 9 I am directed to take account of the several factors set out in the Order but to give no reason for my decision.
The hon. Member was good enough to send me details of this application, and I am much obliged to him. I have given careful consideration to all the representations he has made, but I have to rule that his submission does not fall within the provisions of the Standing Order and, therefore, I cannot submit his application to the House.

ABOLITION OF UNEMPLOYMENT

3.55 p.m.

Mr. Anthony Steen: I beg to move,
That leave be given to bring in a Bill to permit the payment of unemployment benefit to unemployed persons engaged in work of social or community benefit.
Yesterday the Government released some disastrous and bizarre figures which revealed that more than 1,300,000 people are unemployed and that 85,000 more school leavers had joined the dole queues since last month. That catastrophic situation is an indictment of the Government's policies and at variance with their election pledges, but it is more than that. It is an example of Government obstinacy and indifference to the supreme importance of satisfying the needs of the individual and the necessity to maintain his dignity.
My Bill could make unemployment a thing of the past. If the Government willed it, unemployment would be a legend. There are serious moral implications to standing by when 1¼ million people have nothing to do.
In Monday's debate on youth unemployment, the speeches from the Government Front Bench were full of apologies and adopted a defeatist attitude. Ministers seemed confused, yet convinced that they had done everything possible. They cited the job creation programme, the recruitment subsidy, the labour mobility programmes and other measures. Clearly, none of these is enough if unemployment continues to rise. In addition, the projects are very expensive. About £55 million has been spent on the job creation programme but only 17,000 people are employed under it. Something radically new is called for. We have an extreme situation and we therefore need progressive and radical policies. More of the same thing will not do.
My Bill proposes a simple solution which the Government could put into practice overnight. It is recognised that the Welfare State cannot cope with the number of people needing help, and the size and complexity of social deprivation far exceeds the resources available. There are 8 million elderly people in Great Britain, and many of them live alone. Thousands live in miserable homes with


rooms that need redecorating and windows that need cleaning. The lonely cry out for companionship. Single parents ask for help with the care of their children. Institutions such as hospitals and children's homes desperately search for more helping hands. There is a large reservoir of unnecessary human suffering which could be considerably alleviated if there were people available who could make the lives of others better and happier. This is work which will otherwise never get done.
My Bill will offer a challenge to unployed people by giving them, as individuals or in groups, the opportunity to do this work and to relieve the plight of others by tackling the worst problems of their neighbourhoods as they see them. The Bill invites them to develop their own programmes and to create their own jobs. In this way they would gain invaluable experience and new skills by planning and operating projects. They would participate in the identification, selection and planning of projects and, ultimately, in the performance. They would be responsible for all aspects of administration, and by dealing with local people they would develop a sense of pride in their neighbourhood and an innate sense of social responsibility. By introducing those with time on their hands to others who need their help, the human and social problems in this country could be eclipsed.
It may be that not all those who are unemployed are capable of giving personal service. The list of other projects which could be tackled is limitless. Preschool playgroups could be set up and adventure playgrounds built. The meals-on-wheels service could be assisted. Hospitals could be helped. Litter could be recycled and young people with practical skills could build furniture for low-income groups. Others could repair children's toys by setting up toy hospitals.
I am convinced that if local people were involved in redecorating public buildings in their neighbourhood, such as the school and community centre, far less vandalism would result. Indeed, for those who are not equipped to develop personal relationships and do not feel able to create their own practical work, another choice will be open to them. Each local job shop should keep a

running list of all the supervised community jobs that require to be undertaken voluntarily. Therefore, the unemployed would have a wide range of jobs from which to choose, would be told where and what they were, and would discuss these matters with the sponsoring organisation direct. In these ways the solution to unemployment would come from the unemployed themselves. The jobs would be real and important and would offer the supreme reward of all—job satisfacton.
With regard to materials and supervision costs, the Government could act in a similar manner as they do with job creation programmes. On community jobs the unemployed could work on a four-day week basis. In return, the unemployed would be offered wages at the equivalent rate of the benefits they receive as unemployed persons. Although the payments would be relatively modest, they would act as a spur to the unemployed to seek more remunerative work elsewhere. The rates of pay would be an incentive to make projects short-term and would provide some income.
I doubt whether anybody on any side of the House would argue that it is immoral to pay wages on the current unemployed benefit level since these provide at least some basic level of subsistence. The whole philosophy of the insurance scheme is that the seven fat years should pay for the seven lean years. To continue to pay it when there is so much to be done is to make a mockery of the principles on which the system is based. Instead of going to the employment or social services offices to get the dole, those at work in the community would get their wages from the wages office.
For those who argue that the rates of pay should be at the market rate, let me say this. There can be no market rate for work that will never be carried out. By paying the inflated NALGO rates of pay for those under the job creation programme, it means that the £55 million already spent has created only 17,000 jobs. It also means that the young, when paid some £45 per week, will develop a false sense of values.
My Bill will give people a range of choices, but if at the end of the day they decide to do nothing, even though there


is so much to be done, the Government should feel no obligation to pay them. If after a period of two months the unemployed person refuses to co-operate, again the Government are free to pay him nothing. If the unemployed person is ill, he will continue to receive all benefits.
In the researches which I have carried out on Merseyside, I have discovered that 75 per cent. of the 2,000 young people who are unemployed have said that they are bored stiff and will gladly undertake this work. But the Government have done nothing about the situation. Perhaps they want to keep control only of the unemployment situation.
The Bill which I propose is a radical departure, but if the Government refuse to give my proposals serious consideration they will be turning their back on this country's unemployed.

3.44 p.m.

Mr. Eric Ogden: rose—

Mr. Speaker: Does the hon. Gentleman wish to oppose the Bill?

Mr. Ogden: I wish to express limited opposition, Mr. Speaker.
The constituency of the hon. Member for Liverpool, Wavertree (Mr. Steen) is a neighbouring constituency to my own division of Merseyside. But the gap betwen us in the city of Liverpool is certainly very much wider than it is across

the Chamber. I know from experience that the hon. Gentleman has great experience of backing good causes. However, on this occasion perhaps his enthusiasm has gone too far.
The hon. Gentleman said that his Bill would make unemployment a thing of the past. I can only say that I hope that that will be the case, but my fear is that some people on Merseyside might believe that assertion—in other words, hopes might be raised unnecessarily. I ask the hon. Member not to press the Bill or to allow it to be introduced—

Mr. Speaker: Order. The hon. Gentleman must not argue on those lines but must say why he is opposing the measure.

Question put and agreed to.

Bill ordered to be brought in by Mr. Anthony Steen, Mr. Tim Renton, Mr. Leon Brittan, Mr. Tony Durant, Mr. Edward du Cann, Mr. Michael Marshall, Mr. Andrew Bowden, Mr. Peter Bottomley, Mr. Peter Morrison, Mr. Michael Neubert and Mr. David Lane.

ABOLITION OF UNEMPLOYMENT

Mr. Anthony Steen accordingly presented a Bill to permit the payment of unemployment benefit to unemployed persons engaged in work of social or community benefit: and the same was read the First time; and ordered to be read a Second time upon Friday next and to be printed. [Bill 176.]

Orders of the Day — DEVELOPMENT LAND TAX BILL

As amended (in the Standing Committee), further considered.

New Clause 6

PENSION FUNDS: INTERESTS IN LAND HELD ON 12TH SEPTEMBER 1974

(1) Development land tax which would otherwise be chargeable in accordance with section (Reduced Rate of Tax for Pension Funds) shall not be chargeable on any realised development value accruing to a pension fund on the disposal of an interest in land which—

(a) was held by the pension fund on 12th September 1974; or
(b) was held by another pension fund on that date and has at no time between that date and the time of the disposal been held otherwise than by a pension fund; or
(c) is the retained interest or the granted interest in relation to a previous disposal of an interest in land which, immediately before that disposal, fell within paragraph (a) or paragraph (b) above or this paragraph and which has at no time between the time of its acquisition and the time at which it is disposed of been held otherwise than by a pension fund;

and for the purposes of this section an interest in land shall be treated as held by a pension fund on 12th September 1974 if, under the will of a person who died before that date, the pension fund would on that date have been absolutely entitled to that interest if the administration of the deceased's estate had been completed.

(2) Subject to subsection (3) below, in any case where—

(a) on 12th September 1974 a lease was held by a pension fund, and
(b) subsequent to that date, but without its ever having been held otherwise than by pensiion fund, the lease became merged in another interest (in this subsection and subsection (3) below referred to as "the greater interest"), and
(c) after the merger the greater interest was acquired by another pension fund, without its ever having been held otherwise than by a pension fund,

paragraph 8 of Schedule 2 to this Act shall have effect on a disposal of the greater interest by a pension fund which acquired it as mentioned in paragraph (c) above as if, immediately before the acquisition of the greater interest by the pension fund—

(i) the lease continued to exist as a separate entity, and
(ii) the pension fund acquired the lease for an appropriate proportion of the consideration given by it for the acquisition of the greatest interest.


so that the lease constitutes a part of the relevant interest for the purposes of the said paragraph 8.

(3) Subsection (2) above shall cease to apply in relation to a lease at such time as the lease would have come to an end, had it not become merged in another interest, and, for the purpose of that subsection, references (other than in paragraph (b) thereof) to the greater interest include references to an interest in land of which on a disposal thereof by a pension fund, the greater interest was a part for the purposes of part I of Schedule 2 to this Act.

(4) In any case where—

(a) on 12th September 1974 a pension fund held an option falling within section 8(1) above, and
(b) the option was subsequently exercised, without it ever having been held otherwise than by a pension fund, and
(c) the interest acquired by virtue of the exercise of the option (in this subsection and subsection (5) below referred to as "the substantive interest") was subsequently acquired by another pension fund, without its ever having been held otherwise than by a pension fund,

paragraph 8 of Schedule 2 to this Act shall have effect on a disposal of the substantive interest by a pension fund which acquired it as mentioned in paragraph (c) above as if—

(i) the option had not been exercised at the time of that acquisition and the pension fund had acquired the option instead of the substantive interest, and
(ii) immediately after its acquisition of the option the pension fund had acquired the substantive interest in exercise of the option,

so that the option constitutes a part of the relevant interest for the purposes of the said paragraph 8.

(5) References in subsection (4) above to the substantive interest include references to an interest in land of which, on a disposal thereof by a pension fund, the substantive interest was a part for the purposes of Part I of Schedule 2 to this Act.

(6) If an interest in land which falls within any of paragraphs (a) to (c) of subsection (1) above ceases at any time, otherwise than on the occasion of a disposal, to be held for the purposes of a pension fund—

(a) the interest shall be treated for the purposes of this Act (other than this subsection) as having been disposed of at that time for a consideration equal to its market value and as having been immediately reacquired at that value; and
(b) any realised development value which accrues on the disposal referred to in paragraph (a) above shall be treated as not having accrued to a pension fund.

(7) If, at any time after the disposal of an interest in land falling within any of paragraphs (a) to (c) of subsection (1) above, the body which made the disposal ceases to be a pension fund, then, immediately after it so


ceases, an amount of realised development value equal to that in respect of which the exemption in subsection (1) above applied on the disposal shall be treated for the purposes of this Act as accruing to that body, as on the disposal of an interest in land.

(8) Notwithstanding anything in section 44(2)(a) below, an interest in land acquired by a pension fund under a conditional contract entered into on or before 12th September 1974 shall be treated for the purposes of this section as held by the pension fund on that date.

(9) References in this Act to a pension fund are references to such a fund as is established by a retirement pension scheme approved under section 22 of the Income and Corporation Taxes Act 1970 or Part II of Chapter II of the Finance Act 1970 or a superannuation scheme approved under section 208 of the Income and Corporation Taxes Act 1970.—[Mr. Ian Stewart.]

Brought up, and read the First time.

3.46 p.m.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.

Mr. Speaker: With this clause we may also take New Clause 9 (Reduced rate of tax for pension funds).

Mr. Stewart: We had a long debate yesterday on the situation of charities affected by the Bill. Not surprisingly, we have come across similar problems in dealing with pension funds. New Clauses 6 and 9 relate to the position of pension funds and their treatment in respect of development land tax.
New Clause 6 seeks to bring the position of the pension funds more closely into line with that of charities purely as regard to the holding of land prior to 12th September 1974, the date of the White Paper dealing with land. New Clause 9 seeks to introduce a preferential rate of 10 per cent. for realised development value in relation to pension funds.
In Committee we moved amendments seeking to exempt pension funds entirely from development land tax. Had we been successful, we would not have brought forward a new clause in this form. But if we cannot exempt pension funds from this tax we wish to draw attention to the damage which will be done if they have to suffer tax at the rate of 66⅔ per cent. or 80 per cent. or an even higher rate. We suggest that a very much lower rate should be applicable to pension funds because of their special circumstances.
Superficially, in some ways pension funds are similar to charities and many of the same arguments apply, but I must point out that there are some fundamental differences. The Minister of State, when replying to the debate on charities last night, said that not all charities were likely to invest in property or to possess property which for various reasons might in due course become subject to development land tax. That is true. Many do not invest funds in that way at all. They collect income from donations or subscriptions and distribute it, and they do not necessarily have any investments of their own. Therefore, they need to invest in property does not arise.
In the case of pension funds we are dealing with an entirely different type of body whose function is to gather together the savings of a large part of the community and channel them into investment in various forms. One of the main areas in which these bodies have sought to invest their funds over recent years has been property and land. Therefore, they will be very much affected by the provisions of the Development Land Tax Bill.
Before we go any further, it would be right to draw attention to some of the statistics of the pension fund movement. It is impossible to obtain up-to-date figures because the preparation of the totals is usually several years out of date. During our proceedings in Committee, the Minister drew attention to figures produced by the Government Actuary which reflected the situation in 1971. Even then 49 per cent. of employed people in this country were beneficiaries of pension funds, and it was suggested that since that time the proporion was likely to have risen. With that I would certainly agree.
In 1974, when it was a question of whether pension funds were to be taxed for the purposes of the development gains tax legislation then under consideration in the 1974 Finance Bill, some figures of an informal hut, no doubt, accurate kind were prepared by the National Association of Pension Funds. They have been quoted at earlier stages of this Bill. However, they bear repeating again because they are dramatic. At that time—nearly two years ago—the National Association of Pension Funds


had over 60,000 separate pension schemes in operation. They embraced more than 12 million members, of whom, I am glad to say, I am one. Those 12 million members do not include dependants such as I have in the Gallery this afternoon. I suspect that many working peopde, both in this House and outside, also expect to benefit from their pensions in the fullness of time. The 12 million members of the pension funds represent a substantially greater figure of potential beneficiaries, and this figure is a high proportion of our total population.
Of those 12 million members, some 2 million were estimated two years ago to be already in receipt of their pensions. Thus the pension fund movement, which did not get off to a very rapid start but built up quickly in the 1950s and 1960s, and particularly latterly, has already reached the position where it is supporting a considerable number of our fellow citizens in their retirement.

Mr. Peter Morrison: could my hon. Friend clarify one thing? I was not quite clear about the 12 million people who are part of the pension fund movement. Is he saying that over and above that number there are perhaps another 12 million people, including wives or children, who may benefit from the pension funds?

Mr. Stewart: I am grateful for my hon. Friend's intervention, because if there is any doubt on this matter it should certainly be cleared up. The 12 million I quoted are the actual members of the funds. As I was saying, if all those who belong to pension funds have wives, families or other dependants, we are indeed talking about a much larger figure. We might even double it if we assume that each retirement pensioner who benefits from a pension fund has at least one dependant who relies upon that same source of income. It is a considerable proportion of the working and retired population whose pensions have been invested in pension funds and are still being invested, week by week, month by month and year by year. The number of participants in the pension funds is growing.
It is impossible to quote up-to-date figures. My attempt to do so for the

purposes of this debate has met the recurring problem of the difficulty of gathering statistics, except those which are considerably in arrear. This is one of the problems which the Government face as they are not able to quote figures later than those produced by the Government Actuary in 1971.
When we turn from the number of beneficiaries to the amount of money being invested, it will be seen that the sums are also dramatically large. Again, quoting figures from 1974, my information is that at that time there was approximately £24,000 million in the pension funds. Half of this money was in respect of self-administered funds relating to particular companies, and a similar figure was in insured funds operated by insurance companies and on a contracted basis for the benefit of companies which did not wish to run a specific project for themselves. At that date it was estimated that the amount which had been invested in property was of the order of £4,000 million. Those sums represent not only a substantial proportion of the wealth of the community at large but a very significant amount of the funds available for investment in industry, property and so on.
I have alluded briefly to the growth of the pension funds, and I should like to say a further word about this. It has been one of the interesting developments of recent years that more and more companies have decided that they wished to improve the retirement prospects of their employees. That is a desirable change for both social and financial reasons. It is true to say that the energy of the private sector in developing pension funds for its employees has been a notable factor in prompting successive Governments to introduce improved earnings-related schemes for those who are not beneficiaries of private sector pension schemes.
It is fair to say that the initiative was taken by the private sector and that this has had an advantage not only for all those who work and who save for their retirement in the industries or companies concerned but for the community at large as a result of the effect which this movement has had on the attitude of Governments towards their responsibility for retirement pensioners.
To levy development land tax on the assets held by pension funds in their property portfolio would breach a traditional exemption in very much the same way as we were discussing last night in the case of charities. In this respect, the tax position of pension funds is similar. Of course there are technical exceptions, as has been pointed out. If charities or pension funds were to engage in trading, they would be subject to taxation on their trading activities. However, in no other sense have pension funds been subject to taxation. We are dealing again with a major breach of principle as, I am afraid, we were faced with in the case of charities.
Pension funds do not date back to the days of Henry VIII as charities do, simply because in those days they did not exist. I rather think that King Henry VIII had other ways of dealing with those of his dependants whose work was done. Sometimes his methods were rather sharp.

4.0 p.m.

Mr. Tim Sainsbury: I appreciate that his ways were sometimes rather sharp, but usually not with pensioners. There were many almshouses in existence then and that was an effective way of dealing with pensioners. Those who run them, of course, are now prejudiced in their activities by the Government's action on charities.

Mr. Stewart: My hon. Friend's interventions are always helpful to me. He has assisted me in making the point that there is little difference between pension funds and charities in this context. I have no doubt that almshouses provided by private charities would have been suitable homes not only for the pensioners of Henry VIII but for any of his other courtiers who wished to shed their dependants. However, in terms of history, charities are not such a good precedent for pension funds, because they did not come into existence until modern times.
Ever since the early 1920s, when pension funds became a material factor in our lives, they have been exempt from these taxes. It is an unfortunate break with tradition if we now enact legislation to impose this new tax, and at such high rates, on the assets of pension funds. I suppose that they have been exempt in the past partly because they are praiseworthy bodies helping large sections of the community, just like charities, but partly

because the income generated from their resources is taxed in the hands of the recipients. With the increased rate of tax now biting on so many pensioners with even the most modest of other incomes, this is a matter which the Government will no doubt recognise.
It is only two years since a Labour Government decided not to impose development gains tax on pension funds. The original proposals in the Finance Bill 1974 suggested that development gains tax should apply to the assets of pension funds, but strong representations were made and the Government, with good sense and perhaps reasonable generosity, eventually decided that pension funds should not suffer the tax.
It is sometimes said that the development gains tax is a Tory tax. Of course, it is based in many respects on the statements of Lord Barber in September 1973, but it was brought forward by a Labour Government and any changes made between the original proposal and enactment reflect the thinking of the Labour Government of the time. They felt, I am sure rightly, that pension funds should not bear that tax. Yet development land tax is now being introduced to replace development gains tax, and it seems only right that it should inherit that exemption a pension funds.
No doubt another reason for this exemption of pension funds is the recognition by Governments of the need for pension funds to be able to protect their incomes against the ravages of inflation. Whether it is 30 per cent., as last year, 15 per cent., as this year, or whatever it may be next year, such figures are very hard to attain. Under Governments of all complexions there have been periods of dividend control that have limited the amount of income from investment in equities and ordinary shares.
There has always been a difficulty in achieving a yield from Government securities and gilt-edged stocks anywhere comparable with the rate of inflation. There has been a negative yield for a considerable period now when rates of inflation have been very high. Therefore, among other things, the pension funds have looked to their investment in property for one of the sources of income to support the retirement pensioners.

Mr. Tony Durant: Would not my hon. Friend agree that part of the purpose is to guard against inflation, which is another factor to be taken into account?

Mr. Stewart: Certainly it is to guard against inflation. Although the pension funds have a very good record in the rate of benefits which they have been able to pay, this has been made much more difficult in the last year or two and many funds have had to be topped up by contributions from the companies for which they are operating in order to maintain the flow of income.

Mr. Nick Budgen: That is particularly so, is it not, with the large clearing banks? I think that in one instance a pension fund has had to be topped up by as much as £18 million or £19 million.

Mr. Stewart: My hon. Friend is absoslutely right. This illustrates the difficulties of pension funds in keeping pace with their income expectations at a time of inflation. The reason that pension funds have invested a considerable proportion of their investable funds in property is that over the years, despite periods of rent control and recession, taking one year with another over a considerable period, the rents of industrial and commercial property have more or less kept pace with inflation and have sometimes even gone ahead of it. It is the expectation of rising income from rentals that has led pension funds wisely to put much of their money into the property market.
In doing so, they have also brought great benefit to British industry and commerce. Those who build factories, offices and shops are often reviled because of the windfall profits that may be made—that is what the Bill is supposed to be all about—but those who provide long-term investment funds to create that sort of property are not making windfall gains. If they are taxed on the basis of long-term investments, their investments will produce a lower yield or they will have a lower total volume of funds available to produce an income in future.
Many of the larger companies believe not only that their pension funds are of value to their own employees but that they are important for the provision of

capital for the infrastructure of Brtish industry and commerce by their investment in property of this kind. After all, they have a primary duty to look after the interests of their pension fund beneficiaries. I have here a letter, addressed to my right hon. Friend the Member for Crosby (Mr. Page) from the manager of the pension fund of one of the largest companies in the country. He shows this concern very well:
The effect of this new tax will be that the substantial investment in property by pension funds will not make as large a contribution as expected to the provision of retirement benefits to employees, and, inevitably, this short-fall will need to be made good not only by the companies providing these retirement benefits but, in the long run, by the employees who enjoy them.
The employees who enjoy them are of all kinds—male and female, manual and non-manual. In Committee, the Minister of State quoted figures based on the Government Actuary's totals for 1971 suggesting that there were imbalances between manual and non-manual, between male and female and so on.
But that is in the nature of employment. The continuity of job over a long period, such as is suitable for contributors to pension funds, is greater in non-manual trades. Because of the facts of life, in spite of recent legislation, men hold jobs of this kind for longer periods than women. So these discrepancies are not surprising. They merely reflect the present pattern of employment.
But it is important that we should not in this way reduce the available investment funds for industry. The Chairman of the Investment Protection Committee of the National Association of Pension Funds, writing to the Minister last December following the passing of the Community Land Act when proposals for the development land tax were made, put it in these words:
The imposition of this tax on pension fund trustees will result in a progressive depreciation of the property assets they hold. The trustees will have their long term commitments to pay retirement benefits to the 12 million or so work-people; but as a result of this legislation, a significant proportion of their assets will have been depreciated in value. The money needed to make up for this depreciation can only come from the revenue of British industry. The consequence will be, at least, reduced resources available for reinvestment in the employing industry, with all that entails for the trustees and everyone else, and, at worst, increases in the costs of goods and services


(more per ton of steel, more per unit of electricity, more per therm of gas, etc.) thus further fuelling inflation.
Those are serious worries about the effects of imposing development land tax on pension funds.
The Government have adduced reasons for imposing such a tax on pension funds. One seems to be that somehow investment in property or a factory is bad, but investment in the company that conducts the industry inside the factory is good. There is a remarkable statement on record about that matter made by the then Under-Secretary of State for the Environment. He said:
It is far better that investment takes place in manufacturing industry and not in speculative ventures as it has done in the past. If the Bill goes some way towards redirecting pension funds into manufacturing industry, it will have a spin-off which will benefit the country".—[Official Report, 12th November 1975; Vol. 899, c. 1468.]
That, perhaps, is the key to Socialist thinking on this matter. The Opposition believe that if it becomes impossible to build factories and offices, it will be impossible for companies to operate within them.
The Government's second reason is that pension funds do not benefit everyone. But neither—although I say so with some trepidation—does the Letchworth Garden City Corporation, although that does a great deal of good for many of my constituents. I am delighted that it is included among the exempt bodies in the Bill.
All kinds of local authorities, charities and pension funds bestow benefits on the community in a collective sense, although those benefits may not be available in equal amounts or in an equal way to the community as a whole. However, they all contribute—this is their common virtue—to large numbers of people. Whether those people are classified by the locality in which they live or in the industry in which they work does not seem to me to be a material difference.
It was pointed out that a charity for the benefit of railwaymen would gain exemption for the purposes of White Paper day land but that a pension fund for the benefit of railwaymen would not gain such an exemption. Yet a pension fund is much more likely to distribute benefits broadly across all railwaymen and the charity is more likely to be selective.

The logic of the Government's thinking is upside down.
Early in our consideration the Minister of State said that charities were somewhere between local authorities and pension funds. He tried to imply that there was some kind of descending order of virtue in the various bodies that served the community. Local authorities have complete exemption. Charities benefit from some minor concessions in the Bill. But pension funds are very much the "tail-end Charlies" in the race. Unless we are able to do something for them in this sense, they will suffer grievous injury in the years ahead from the application of the development land tax.
4.15 p.m.
Separate problems are represented in the two new clauses. The first relates to land held by pension funds in 1974. In spite of a recent well-publicised case in Sussex, it is not normal for pension funds to enter into highly speculative situations. Pension funds on the whole have become a major source of finance for development on a continuing basis, including residential and other kinds of development. The expected improvement in value to which they looked through eventual development was part of the arithmetic of their original investment. They could not have anticipated the details of this legislation. Nor could they have anticipated that the Government would have been so insensitive as to impose development land tax on them. Therefore, many of the acquisitions that they made before that date could not have occurred in anticipation of the imposition of this tax.
I stress that it is more important in the longer run that pension funds—as we have argued for charities—should either be subject to no tax on their development or to a low rate, such as the 10 per cent. that we suggested. They look towards the maintenance and improvement of their income in the longer term by means of redevelopment in due course.
I should like to quote some remarks in this context which were made by the Chairman of the Land Sub-Committee of the National Association. He writes:
In the market as it was prior to the White Paper Day the prices paid by the Pension Funds generally reflected the prospect of such enhancement in income flow, and this was part


of the background which induced the Pension Funds to invest. Except for the 10 per cent. tolerances, the present provisions of the Bill will mean that in order to obtain this enhanced flow of income on redevelopment the Funds will have to provide (as well as the building costs) an additional payment to meet the DLT which will arise on the commencement of the development.
Yesterday the Minister said that if the charities were to suffer the tax, that was just one of those unfortunate facts about the future that they must take into account. I suspect that he might say the same about pension funds. But that is rather like saying to a condemned man, "You may have to change your thinking about the future, as you will not have time for lunch."
The Minister said that this was a longer-term problem because the tax would not take effect until the pension funds redeveloped their properties. But this is also an immediate problem in a real sense. At the end of the day, such properties will have a lower value on the market and a lower value as investments. That means that there will be a need to amortise their value over the life of the investment out of the income that they generate in the meantime. Therefore, from now on their income will be reduced by the need to write off at least a part of the cost in the coming years. Therefore, this is not only a long-term problem. It is a problem the effects of which will begin to be felt fairly soon.
The pension funds have become a much more important part of the scene in recent years as a result of the growing need to provide retirement pensions. But their importance has been accelerated by company tax legislation and the demise or the weakening of the position of the property companies. I cite the well-publicised case of Artagen Properties Limited, for which one of the insurance companies made a bid. It is predicted that many of the property companies might end up in the hands of insurance companies. However, insurance companies, like pension funds, are now becoming the main means of channelling private savings into investment in the private sector. That is taking place on a growing scale.
I am delighted that the hon. Member for Liverpool, Walton (Mr. Heffer) has come into the Chamber. The hon. Gentleman missed most of these words

of wisdom, but I promise that if he listens attentively he will be convinced of the importance of exempting pension funds from development land tax.
Why are pension funds to be burdened in this way? They were exempted, after due consideration and careful thought by a Labour Government, from development gains tax.
Yesterday, I felt a little sorry for the Minister of State in the debate on charities, because I thought that he was defending the indefensible. It seemed to me that sometimes he was doing so against his own personal judgment.

Mr. Nicholas Fairbairn: If my hon. Friend reads the Minister's speech, he will see that the hon. Gentleman did not even bother to defend the indefensible.

Mr. Stewart: I was trying to be a little more courteous than my hon. and learned Friend, but the point is not lost.
I suspect that today, like most reasonable people, the Minister will again be with us in spirit. These proposals can only have come about because the whole of the Bill lies under the evil shadow of the community land scheme.
Development land tax is not a genuine tax in the way that we understood taxes in the past on capital and gains. It is a transitional levy. I believe that the Government intend to make as few exceptions and exemptions as possible in case they impede the progress of the community land scheme. But the Government should think again, because by failing to respect the claims of pension funds they are again showing that they are influenced more by doctrine than by reason. To bring pension funds within the scope of this tax is not only socially retrograde but will be financially harmful to millions of beneficiaries of pension funds. Economically over the coming years it will be a far-reaching constraint on the supply of funds available for new factories, offices and shops and all the other properties in which future generations will need to work and go about the business of their daily lives.
I hope that these new clauses will commend themselves to the House.

Mr. Walter Clegg: Looking at the Government Benches is


rather like looking at a desert with two palm trees. I confess that the hon. Member for Liverpool, Walton (Mr. Heffer) is a very bulky palm tree and gives plenty of shade, but I wish that more of his hon. Friends would come in to listen to the debate, because this matter affects many of their constituents just as much as it affects many of mine.
North Fylde is a retirement area. We have not only retired civil servants—because we have a big civil service establishment there—but many people who rely on pension funds for their pensions. There is a growing difference between these two categories of pensioners. The civil servants now have inflation-proofed pension funds, as we have in the House. That is very different from the situation of others who rely on industrial pension funds.
I must declare an interest. As well as having a pension from the House—I hope—I shall also have a self-employed pension. Therefore, I may be directly involved.
I dare say that the Minister will say, as he said yesterday, that the objective of this legislation, as of the Community Land Act, is to return to the community the betterment value when land is sold. That was his main reason for opposing the exceptions or the deferment for charities, about which we were arguing yesterday.
The hon. Gentleman will no doubt say that if we give this concession to pension funds, we shall be denying to the community the benefit of the betterment that the community has created. The community does not work very hard to create this particular benefit. It merely draws lines on maps. It does no more to develop the land in that way than anybody else does.
The Minister for Planning and Local Government told us that the Bill and the Community Land Act were based on the community making great profits from the sale of land. I think that at one time the right hon. Gentleman said that for every £1 million for which the State bought land, if could expect to get £4 million when the land was sold. Those poor souls who voted for the Labour Government in the hope of getting cheaper land will be very disappointed, because the land will be the same price as if this scheme had

not been introduced. The Government have based their plans for what they are to get out of development land tax and the profits that will flow from the sale of land on the days when land and property prices were leaping ahead.
If the Minister argues, as he did yesterday, that it is unfair to exempt pension funds because the community will not get the benefit, we are entitled to argue, on the same lines as we did regarding charities, that many millions of people will benefit if the new clause is accepted. It would be of some comfort to them to know in these days of great inflation that there was a provision in the Bill to enable them to get better pensions.
It is fair to say that millions of people will benefit. Those employed by the State have no need to worry about these matters, but those employed by industry have a great deal to worry about.
In addition, the more effective the pensions given by pension funds, the less pressure there will be on the State and on public spending to make up the difference. Any move in these inflationary days that will make it more difficult for the pension funds to pay these pensions is to be deplored.
It is common knowledge that many firms are having great difficulty in topping up their pension funds to keep pace with inflation. In some instances they expect that in a few years, if inflation continues at its present rate, they will be paying as much for pensions as for the salaries and wages of their employees. That cannot go on.
I suggest that a good argument has been made for these new clauses. We are talking not about a tiny group but about a very wide range of people, including many trade unionists, who are looking to the House to do something that will not reduce but increase the value of their pensions.
I congratulate my hon. Friend the Member for Hitchin (Mr. Stewart) on moving the new clause so clearly and with such modesty. I fully support him.

Mr. Sainsbury: I congratulate my hon. Friend the Member for Hitchin (Mr. Stewart) on introducing these new clauses. I apologise for not having been present when he began his remarks. I was still in the Library and was caught


unexpectedly by the speed with which we started today.
I am reminded by my hon. Friend the Member for North Fylde (Mr. Clegg) that this is yet another matter in which one should declare an interest. I am the possessor of a self-employed deferred annuity and a potential beneficiary from a pension fund. The number of occasions on which we have to declare an interest under the different headings in this legislation is an indication of the large numbers of people who, much to their surprise, may find themselves adversely affected by this measure.
I have been reflecting on what the Minister of State is likely to say in his usual charming way in reply to the debate. I suspect that he will say, as he did yesterday when we discussed charities, that there is a gulf between us. My belief in the likelihood of the hon. Gentleman saying that was reinformed when I looked at what he said in Committee. He said probably exactly what he will say today:
We had a long and interesting debate on these amendments. I do not want to pursue the arguments again. There is a gulf between us.
Like the Minister, I do not wish to repeat the arguments, even if I am still left a little puzzled about the nature of the gulf between us. But, looking further forward, I find that the hon. Gentleman made the following mysterious statement, presumably about the gulf:
We have the local authorities at one end, pension funds possibly at the other, and Churches falling in the middle."—[Official Report, Standing Committee J, 29th April 1976; c. 730–3.]
I do not know whether they were collapsing for want of funds in the middle of the gulf but I am interested in the words "possibly at the other". I do not know whether the Minister was still a little undecided, at least at that time, whether on reflection he could relocate pension funds at a more favourable end of this gulf, spectrum or whatever it was to which he was referring.
The Minister and some of my hon. and right hon. Friends may be aware that I am not entirely in sympathy with the suggestion that we should have entire relief for pension funds from the provisions of this tax. There is always a risk

in creating specially privileged classes of developer, and I expect that I might carry my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) with me on this aspect of the matter.
4.30 p.m.
We have to recognise, however, that with charities we have a situation that is not as satisfactory as we would have liked as a result of last night's proceedings—and charities have exemption in respect of land that they held as at 12th September 1974. As my hon. Friend the Member for Hitchin has pointed out, there is very little difference between the activities of pension funds and those of charities in the sense that pension funds are devoting their funds to a particular aspect of the much more widely-ranging activities that are carried out by charities. One could well have sheltered accommodation—as such provision would be called nowadays, rather than "almshouses"—provided by a charitable fund, and there is such provision by charities. This is almost directly equivalent to the provision for the pensioner which is made by pension funds.
There must, therefore, be a very strong case for arguing that pension funds should have at least the same exemptions from the provisions of this tax as charities have, because, if not, we have created a privileged class the other way round. It is my impression—and I am sure that my hon. Friends will correct me if I am wrong—that whereas against that background I might find that New Clause 9 goes perhaps too far, New Clause 6 seems to be entirely logical in its wording in giving pension funds this exemption in respect of land which they held on 12th September 1974. The Minister argued, as far as he was able to do so—and I shall try to be as charitable as I can about his arguments in the debate on New Clause 1—that we must be particularly concerned with anything which could have an adverse effect on industry. May I quote his words during yesterday's proceedings? He said,
We do not want anyone to suggest that we might have impeded industrial development by our proposals."—[Official Report, 22nd June 1976; Vol. 913, c. 1456.]
It was interesting phraseology. He was saying that it does not matter if we


actually impede industrial development by these proposals but that if one suggests that that might have been done it becomes very unfortunate. But, being charitable, let us assume that in the excitement of the moment it was merely the words that were wrong and that the Minister wanted to ensure that industry was in no way impeded by his proposals. I take it by his nod that I am correct in that interpretation. Has he, therefore, reflected that to the extent that the assets of pension funds are reduced by the the imposition of DLT on their property holdings, they will have less income with which to meet their responsibilities and liabilities to pay pensions to their beneficiaries, and that as a direct result of this, many companies will have to make further transfers from their cash resources to their own pension funds to enable those pension funds to continue to meet their liabilities?
The proposals for taxing pension funds will directly affect the cash flow of British industry adversely. One of my hon. Friends has referred to the number of occasions on which substantial industrial concerns have had to make very substantial transfers to their pension funds to enable them to meet their obligations and to continue to pay pensions. I know that the Minister has very little sympathy for retailing, but his hon. Friend beside him, the hon. Member for Edmonton (Mr. Graham), might be expected to have more sympathy with retailing even though he has not yet been able to show it in the Lobby. There was a recent example of the best known retailer in this country making a very substantial transfer to its pension fund to enable it to meet its obligations.
I would ask the Minister, therefore, to consider that aspect of the proposals. Not only have we the aspect of the equity of the matter as between charities and pension funds on land holdings at 12th September 1974, but we have also to reflect on the adverse effect of the Minister's proposals on the cash resources of British industry and commerce because of the obligation which companies might have to meet for their pension funds as a result of this legislation.
My final point is one on which I need not enlarge because it has been so ably covered by my hon. Friend the Member for Hitchin. In my own constituency,

and I am sure in the constituency of everyone in the House at this time, there are many people who, although they are unaware of it, are deriving their pension from the skilled property management shown by pension funds of which they are beneficiaries. I wonder whether the Minister could say why it was that in all the frequent references by his party to their proposals in respect of the Community Land Act on this proposed form of taxation, which were always laudatory, they did not draw the attention of beneficiaries of pension funds to the adverse effects of their taxation proposals. Could it be that we ought to look again at the Trade Descriptions Act to see whether the disadvantages and reduced benefits from some of these proposals should be referred to, even if in only small print?
I should be very interested to hear from the Minister of any statement or reference in any publication emanating from his party which drew the attention of pensioners to the adverse effect on their pensions that could result from DLT. I wait with interest to see whether the Minister will receive advice from above or below the Gangway, or from the Box, on this point. I should be very happy to give way to any hon. Member who could give me some information on this point, but I am afraid there is none forthcoming. Again we have an example of legislation presented as being in the interests of the community but which, when we look at how it affects individuals in our constituencies, is seen to have an adverse effect. To me, that alone is sufficient reason to support my hon Friend in this clause.

Mr. Peter Morrison: I, too, must declare an interest as being a future beneficiary—I hope some way ahead—of a pension fund.
I am rather amazed that throughout the whole debate we have had on the Government side of the House only the Minister and the Whip present—although recently we have been honoured—and still are, admittedly—by the presence of the hon. Member for Liverpool, Walton (Mr. Heller), the hon. Member for Luton, East (Mr. Clemitson) and the hon. Member for Liverpool, Garston (Mr. Loyden). When we talk about pension funds, which affect the old more than anyone else, and as the Labour Party always, quite rightly


and understandably, makes a great play for the old and wishes to give them every possible support, it is amazing that throughout a debate such as this we should have only three Labour Back Benchers and two Labour Members on the Government Front Bench. It is quite extraordinary.

Mr. Fairbairn: Is it not even more surprising that the Scottish National Party, which bases its advertising on the terrible plight of the old in Scotland at the hands of the English being deprived of the oil revenues, should not worry whether they get good pensions?

Mr. Morrison: I am grateful to my hon. and learned Friend. One notices also that Liberal Members are apparently totally uninterested, for they have not been present during the whole debate. I am most surprised about the numbers on the Government Benches, because Labour Members of all people will talk about pensioners, and there are so few Labour Members present. Admittedly, those who are present make up in quality for the quantity that we are lacking.
The point has been well put by my hon. Friend the Member for Hitchin (Mr. Stewart) that there are a substantial number of people who stand to benefit from pension funds. When I intervened in my hon. Friend's admirable speech, he pointed out that there were 12 million people who would directly benefit. But, of course, they will have at least one and possibly two dependants who will, therefore, indirectly benefit. Therefore, however one looks at it, the future of pension funds in Britain is very important, indeed. Many people will be affected.
I would contend that the Government do not really like pension funds—exactly as I contended last night concerning charities. The Government prefer the State to do what a charity does, or what a pension fund might do for an individual or a family. That is why the arguments which have been so cogently and so well put, in Committee and certainly in the House today, fall on stony ground. At the bottom of their hearts, Labour Members do not really mind whether pension funds continue to exist.

Mr. Durant: My hon. Friend has said that the Government do not appear to

be interested in pension funds. Perhaps they are not aware that the coal miners have very large pension funds, most of which are in property.

Mr. Morrison: I am certainly aware of that. Many trade unions have large pension funds invested in a multitude of different things, including property. I gather that some are buying old master paintings nowadays.
I return to the main point. If the pension funds industry is in a healthy condition, that will inevitably save the Government money. The argument that will come from the Minister—we have heard it previously and no doubt we shall hear it again—is that Whitehall is better at taking out the money and distributing it. But that costs money and will, therefore, increase the public sector borrowing requirement. It is much better that the private sector should be coping with those who stand to benefit from pension funds rather than the public sector.
4.45 p.m.
Having listened to the Minister quite carefully last night, and yesterday afternoon, I have a suspicion that he is not really proud of this Bill but is a little ashamed of it. I have that suspicion because I am sure that there will be no doubt towards the end of this debate that those of us who have argued in favour of pension funds being either partially or totally exempt have won the argument, as we did with charities. To a certain extent I think that the Minister would agree.
The reason why I say that the Minister is ashamed of the Bill is that he knows in his heart of hearts that if he made one small breach in the dam, or two or three small breaches, certain exceptions which should be made for genuine and good reasons, the principles on which he bases the Bill would come flying down and there would be no need for the Bill at all. Perhaps on this new clause the Minister will see that there is a point in making an exception. He is not very proud of the Bill. Although we shall not expect him to demolish all the arguments that he has been deploying in Committee, or to abolish the Bill, we expect him—because we think that we are winning the argument—to make an exception in this case for pension funds.
As I have said, not least the Labour Party, in terms of getting votes, plays for


the older vote. So let us have a decision that will substantiate that policy and not just total unwillingness to accept the new clause.

Mr. Budgen: I must start by declaring an interest as a potential beneficiary under a self-employed person's pension scheme. The House may well reflect that for all of us there is a deep desire to combine the right personal balance between risk and security in life. In some parts of our life we want the excitement and the uncertainty of risk and endeavour. We want the excitement of knowing that perhaps at the next General Election we shall be thrown out, or that perhaps after the end of a particular building contract we may find that we have to look for another job.

Mr. Ivor Clemitson: There is no excitement in that.

Mr. Budgen: There may be some excitement if it is compensated for by high wages in the short term. I suspect that there are many people who are high wage earners—for instance, bricklayers in a period of boom—who would say to themselves "I do not want a steady job. I would rather be an entrepreneur and make a lot of money sometimes and on other occasions run the risk of being unemployed."

Mr. Fairbairn: Perhaps I may advise my hon. Friend. I get absolutely no pleasure from any concept of thinking that my seat is at risk, and I prefer to make high wages all the time.

Mr. Budgen: By his very presence in the House my hon. and learned Friend demonstrates that he does not live by the precepts that he puts forward. He left a steady job to take the risks of coming here. All of us take risks here.
The other side of the coin is that we wish to have security. We are not alone in wishing to have security in our old age. It is a deep feeling that every human being has. The fact is that when the Government try to attack the security that all of us want in our old age, they will find that, as a compensation, each individual will be less prepared to take risks during his working life. He will be less and less prepared to be an entrepreneur, a high-wage earner—perhaps a high-wage earner at the tax Bar—or a high-wage earner in any other of the

various activities in which those of us who take risks have to work.

Mr. John Cope: Are not those two facets, risk on the one hand and security on the other, exemplified by the two contenders for the leadership of the Liberal Party?

Mr. Budgen: I do not wish to comment on the characters of those two contenders. However, there is this extraordinary paradox of wanting both risks and security. If we attack the security of 12 million of our fellow citizens and say to them "We are going to take away the hope that you had of a modest competence in your old age", they will be more and more disinclined to take risks in their work. They will come more and more to the State and say "Prop up our unprofitable job", or "Prop up our particular factory or industry", and they will be less and less prepared to come out and fight vigorously for a high-wage, high-profit, high-risk economy.
The Government's proposal cuts into the security of 12 million of our fellow citizens. As I look at the almost vacant Benches on the Government side of the Chamber, I reflect that the 12 million potential beneficiaries of those who join the 60,000 pension schemes under the National Association of Pension Funds, together with their dependants, are a greater number than all those who join the Trades Union Congress. Only 10 million people are associated directly or indirectly with the TUC. The National Association of Pension Funds did not join in the corporate State meetings that occurred at various Government places. They did not talk about the unacceptable face of capitalism. They did not talk about being unprepared to accept any cuts in Government expenditure. All they asked was to be allowed to go on providing for the security of their fellow citizens.
Our plea is not a plea for the nabobs of the City, or for the CBI, or the gaffers. It is a plea for the ordinary working people who are prepared to work to provide for their families for perhaps 40 years. They want only the dignity and security of providing for their own old age. Such potential beneficiaries will be attacked by the development land tax.
Let us examine the way in which the average pension fund is invested. In


broad terms it is invested in three ways: one-third in equities, one-third in gilts, and one-third in property. Equities have become less and less valuable because of price control, dividend restraint and the vigorous attack on private enterprise and the concept of private wealth that has been the centrepiece of the present Government's extraordinary relationship with the TUC. That part of pension funds has taken a bit of a knock.
The one-third invested in property has already taken a knock from the attitude not just of this but of the last Government. The one-third in gilts is probably the only part likely to enjoy an increased revenue in the next few years as the Government try in a non-inflationary way to fund their horrifying £12 billion borrowing requirement.
There is a reduction both in the asset value of pension funds and in their incomes. Their liabilities are becoming infinitely greater because they are related to the going rate of inflation and they are under an obligation to pay pensions related to the going rate of inflation or to the going wages at the time of payment. They are trying to fund increased liabilities with reduced income.
Last year the rate of inflation was about 26 per cent. This year we must anticipate that it will be between 9 per cent. and 12 per cent. It might be more, but I am trying to argue in the most charitable way and to put the case most favourable to the Government. Let us say that the rate of inflation will be 10 per cent. this year. On the average equity, a pension fund has a return of about 4 per cent. on its shares. How on earth with a return of 4 per cent. can it hope to fund liabilities that went up by 26 per cent. last year and will go up by 10 or 12 per cent. this year?
Pension funds will either have to turn to the employers—who are caught in the vicious spiral of inflation, the Price Code and other forms of Government interference and might not be able to assist—or they will have to bite into their capital reserves. Unless pension funds are treated in a special manner, many of those who wish to retire with the security and dignity of having provided for their own old age will become no more than pensioners of the State, which so many hon. Members appear to want.
They will be dependent not upon their own activity but on political action. By the 1980s they will be visiting the surgeries of Government Members. They will not be saying that they are relying on their own pensions but that their future security is in the hands of politicians. They will have to depend on the pressure that they can put on politicians for a modicum of comfort in their old age.
We are talking about the independence of private wealth and when one-third of the pension funds of 12 million of our citizens is being attacked, the Tory Party, which is preoccupied with independence and freedom, should be in the forefront of the battle.

Mr. Fairbairn: I have to declare an interest, if it is an interest. I pay £3·16p a year in order to obtain a pension for my widow under an Act passed in the days of George III when the Scots were interested in their families' welfare. I note again that Members of the Scottish National Party are absent from the debate.
My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) put forward the real and human arguments in favour of the new clause. But there is a more realistic argument based on the ordinary practical facts of the matter which the Government constantly overlook. If one removes from pension funds part of their money, they will either not be able to discharge their obligations or they will have to obtain the money from some other source, such as Government subsidies.
The Government's unrealism is particularly irritating. The Government attempted, through the mouth of a delightful but completely unbelieving Minister, to argue on the basis of some principle. I have re-read the speech to which I listened in Committee. It is rare in our profession to be able to re-read one's own speeches and discover how ineffective and bad they were. In this case I am sure that if the Minister re-reads the argument with which he attempted to convince his jury, he will see that it is fallacious in almost every sentence.
5.0 p.m.
The hon. Gentleman's principal argument—that what the community gives it


should get back—is a nebulous concept. If it has any validity, the obverse of the coin is that what the individual creates he should be allowed to keep. But the Government's philosophy is the reverse. If the individual improves his property, he is rated higher and he must pay more tax for his effrontery; but if the community gives him planning permission to do it, it should have a benefit from that as well. The philosophy is one of "Heads I win, tails you lose."
The Minister said in Committee:
The argument is that pension funds are good … I do not seek to dissent at all from that assertion.
That is a major triumph of condescension. He went on to say:
However, one should get this matter into perspective. Pension funds are not the only bodies that serve the community.
However, they happen to be one of the exempt bodies which serve the community, and the fundamental argument is that they should remain exempt and not have part of their present income removed for a spurious theory.
The Minister added:
62 per cent. of male workers and only 28 per cent. of female workers were members of pension schemes. … It is in the nature of things no doubt."—[Official Report, Standing Committee J, 28th April 1976; c. 696–97.]
I do not know in the nature of what it is that more than twice as many men do what women do, but I think that that was just said as a pause for breath. The hon. Gentleman seemed to think that it was unfair that more men were members of pension schemes, without relating the matter to the number employed or the fact that women were covered by their husbands' pension schemes.
The Minister went on to say that the purpose was to restore to the community most of the benefits arising from betterment following planning permission. That is the supreme fallacy. We have a sort of biblical concept that the Lord gives and the Lord shall take away, that when an official in the planning office gives someone permission to put up a public lavatory, a sweet shop, or a bungalow at the bottom of his garden, that affects everybody else and is all to be taken away.
I read the Minister's speech right through again and underlined it all. He

was compelled to advance the wettest, most non-committal argument possible, and he clearly did not believe in it.

Mr. Russell Kerr: The hon. and learned Gentleman should read his own speech in Hansard tomorrow.

Mr. Fairbairn: I am glad that the hon. Gentleman is listening so carefully.

Mr. Kerr: I always listen carefully to the hon. and learned Gentleman.

Mr. Fairbairn: I am obliged to the hon. Gentleman.
The Minister advanced the spurious principle that what the community gives it must take away. The practical fact is that it means removing a large part of the funds from which pensions are now paid. The Government have no answer to those who ask what will take their place or what will happen on the retirement of the 12 million people who depend on them. What is so appalling—I except the Minister from this criticism—is that they do not care either.

The Minister of State, Treasury (Mr. Denzil Davies): I am grateful to the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) for reading my speeches and underlining the words. I try not to read my own speeches, and I shall try not to read what I said in Committee, but there will inevitably be a certain amount of repetition in this debate, as there was last night when we debated charities.
I begin by returning to the figures that I gave to the Committee, not to prove any point but to make clear that many people were not members of occupational pension schemes. Some hon. Members have implied that we are here concerned with the vast majority of people, all of whom are in such schemes, and that the Government were depriving all of them of benefits by charging pension funds to development land tax.
I said in Committee that in 1971, 49 per cent. of people were members of occupational pension schemes. The figure may now have gone over the 50 per cent. mark. We are concerned with half the employed population, which is a substantial number of people.

Mr. Fairbairn: Does the Minister appreciate that in the local authority,


which is his criterion for the community, more than half the people use less than half the services, so the same criterion applies?

Mr. Davies: I do not dispute that, but let us look at the breakdown of employed people. Sixty-one per cent. are non-manual workers and 35 per cent. are manual workers. We are concerned with a smaller number of manual workers who are members of occupational pension schemes. I am making the point that not everyone is a member of such a scheme. We are not seeking to impose an enormous burden on the vast majority of the people by introducing this taxing provision.
The hon. Member for Hitchin (Mr. Stewart) suggested that considerable damage would be done to pension funds. We are concerned only with taxing the betterment profit made by a pension fund. The fund will be exempt from capital gains tax on any investment that it makes. Hon. Members talk about investment. Betterment profit is not an investment, according to the normal meaning of the word. When one invests money, one receives a return from the investment. We are concerned with a betterment profit arising from the grant of planning permission. Normal investment in property and shares will still be completely exempt from capital gains tax, and pension funds can switch from one asset to the other, free of that tax. The funds have great advantages in respect of income tax, and they will continue even when the Bill becomes law.
The hon. Gentleman rightly said that if a pension fund engages in trade it is taxable at present. If the managers of a pension fund believe that they can profit on a piece of land by buying and selling it almost immediately, my understanding of fiscal legislation is that the profit is taxable. We are not breaching a substantial principle. The principle is that where the fund makes a trading profit, possibly a fortuitous trading profit, the tax is already levied.
We are concerned simply with the other kind of case manifested in the hon. Gentleman's example of the land in Sussex, where a fund buys land at current use value, possibly in the hope and

expectation that planning permission will be granted, and then disposes of it at a considerably increased price. We are not concerned with the normal investment of a pension fund, because often that investment will be in property with high base values, where there is little likelihood of a betterment profit. Most cases caught by this legislation will be invested in green-field sites.

Mr. Cope: Not only green-field sites but development in towns will be affected by the Bill. The hon. Gentleman said last night, and has again suggested, that the gains in question will be speculative, windfall gains. That is a capricious view of the way in which local authorities make their decisions, suggesting some form of a lottery.

Mr. Davies: They are windfall gains, because they arise as a result of somebody else's action in granting planning permission. A pension fund would pay tax on the betterment profit in most cases where it had invested in land with a low value and then planning permission had been granted.
That is the sort of situation with which we are concerned. I suggest to Opposition Members that there is a good case for saying that such windfall profit, whether it is made by a pension fund, a property company or an individual, arises not from anything done by the investor but from a purely extraneous act by the local authority.

Mr. Fairbairn: In his concept of fairness, does the Minister agree that it would be a good idea if the Treasury were to make up the loss that a pension fund makes on an investment on the basis that it has been made a windfall loss?

Mr. Davies: No doubt the hon. and learned Gentleman will be present at a later stage when we discuss losses in relation to development gains tax. No doubt he will be able to deploy his arguments in those discussions.
The hon. Member for Hove (Mr. Sainsbury) felt that there would be some discrimination if we gave this relief to pension funds. He felt that there might be some discrimination between the pension fund that owns land and sells land and pays no tax, and other bodies—for example, property development companies


which seek to develop and which would have to pay tax.
I did not use the two-tier market argument in relation to charities, as I did not think it was the best one to deploy, but here we can use it. If we give this exemption to pension funds that are in the property business—some of them are in it in a big way—we are discriminating between the pension fund that will pay no tax and the normal property company that will have to pay tax at 80 per cent. That is the discrimination. Surely that is a distortion of the property market that Opposition Members would not wish to see.

Mr. Sainsbury: Does the Minister recall that it was because of that effect that I said that New Clause 9 was not entirely supportable, and that New Clause 6 seemed to meet the point that I was making, and that the Minister has outlined to the House—namely, that charities and pension funds often carry out much the same operation?

Mr. Davies: I am glad that the hon. Gentleman goes some way towards agreeing with me and crossing the gulf that at an earlier stage he did not think existed. At least he has admitted that it is a fair point. By accepting New Clause 9 we should be creating a two-tier property market that would discriminate against property companies in favour of pension funds. Surely Conservative Members would not favour that situation. It does not seem to be favoured by the hon. Member for Hove.

Mr. Cope: Does the Minister appreciate that his argument can be used against an exemption for pension funds from income tax and capital gains tax, when earlier he gave an undertaking that those taxes would remain exempt as regards pension funds?

Mr. Davies: That argument may well be used, but, as I have said, pension funds will not be charged income tax or capital gains tax. If we were considering these matters from scratch and considering them academically, that argument could be used in relation to those two taxes. As regards development land tax, I believe that I have put forward a strong argument, although it does not seem to have been recognised

as such by Opposition Members, apart from the hon. Member for Hove.
New Clause 6 seeks to give the same kind of relief to pension funds as is given to charities—namely, exemption for land owned on 12th September 1974. As I tried to argue in Committee, there is a difference between a charity and a pension fund. I accept that there is little difference between the Church of England, as a charity, when it purchases shares as an investment, and the ICI pension fund, which purchases shares or land as investments.
However, charities, especially the Churches, hold what might be called operational land and not investment land. That is why we gave the exemption to charities. Charities have to dispose of operational land and find other land on which to work. That does not apply to pension funds, whose investments in land are purely investments and are not for operational purposes. That is why the exemption was given to charities in relation to land held on 12th September 1974. The Churches would have been especially affected if we had not brought forward that exemption. Otherwise, in terms of investment in land, there is not much difference between one and the other.
5.15 p.m.
To argue that the charity exemption should now be given to pension funds is to misunderstand the purpose of the exemption, which was mainly intended to benefit the Churches and religious organisations, which may have to move from one part of the community to another as the population moves.

Mr. Budgen: Is it not right that the pension fund of the clergy will benefit because of the exemption that has been given to charities and to Churches? If that is so, what is the distinction between, for instance, the clergies' pensions and the miners' pensions?

Mr. Davies: I make it clear that in principle there is no distinction, in terms of the investment of funds in investment property. However, charities, especially Churches, have other land, which is not investment land but operational land, on which they have to operate. I do not want to labour this point as I have tried


to explain it before, but the exemption is to benefit those organisations which otherwise would have been adversely affected.
We are concerned with the intention of benefiting the whole community. The hon. Member for Hove poured some scathing words on the contrast that I made between local authorities, charities and pension funds. I said that local authorities were at one end of the scale, that charities were possibly in the middle, and that pension funds were at the other end. In referring to pension funds, I had in mind occupational pension funds.
There is a private contract between the private pension funds and the private individual. It is not a public matter, although many members of the public benefit from pension funds. The occupational pension funds arrangement is an entirely private matter. Local authorities do not benefit in the same way, as their main concern is the benefit of the public and the community. I tried to argue that in between there are charities, which can benefit private persons but have to meet the test of public interest and public purposes. That is why I drew the distinction between authorities, charities and pension funds.
We are concerned with giving the primary benefit of gains arising from planning to the community and not to the private interest, namely, the pension fund. I can give one example that applies to my constituency, or to any other constituency, where the local authority wishes to purchase land for building a school. Under present law, if that land has betterment value the local authority has to pay 100 per cent. If this legislation is passed, the local authority will pay much less than that, because of net of tax provisions. I hasten to inform hon. Members that we have had more representations from the NUM than from any other pension fund on this matter, it being very local and voluble in its representations because it holds so much land in its pension fund. We have resisted those representations. I hope that hon. Members will give us some credit for doing that, as yesterday they were scathing about our domination, so they allege, by the unions.
If the NUM pension fund owns a piece of land and is able to dispose of it without paying any development land tax

the local authority suffers by having to pay much more for the land. Therefore, one has a conflict between the interests of the local authority and the interests of the pension fund. Very often the investments that are made by a pension fund have no bearing upon the interests of the local community. A pension fund may invest in land merely in the hope of making a betterment profit. We think that that is unfair. We think that primary benefit should go to the local authority. We are concerned with only a small number of pension fund investments that produce windfall gains. Normally the capital gains that they make from their investments are completely free from tax.
The first new clause tries to equate the position of charities and pension funds, but they are not comparable in terms of the exemption. The other new clause seeks to create a two-tier market and to introduce discrimination against people whose business it is to develop property. For those reasons I ask the House to reject the new clause.

Mr. Graham Page: By virtue of 60,000 pension schemes, there is the provision of a very extensive welfare service to 12 million people, plus their dependants, and some 2 million are already receiving pensions under those schemes. As the Minister said, 49 per cent. of the employed people come under such schemes.
It is recognised in the Bill that many authorities which provide this kind of welfare service or social service are exempt entirely from this tax. Such bodies as district councils, county councils, parish councils, community councils, even police authorities, fire service committees, some housing associations, development boards, and the New Town Commission, are all providing public services and are allowed to be let off this tax entirely. But are they providing such a very different welfare and social service from the 60,000 pension schemes which provide these benefits of pensions to their 12 million members?
Under the Bill some sort of relief is recognised for the BBC and the IBA, the Atomic Energy Authority and the regional water authorities. Are they more deserving than these pension schemes? Yet not a tittle of relief is given in the Bill for the provision of pension schemes.


Pension funds benefit the public, as my hon. Friends have said already in their arguments, not only by providing pensions but by providing for a source of very valuable and useful investment to industry and commerce.
Do the Government wish to deter these funds, and to move that money, as was suggested in earlier debates, from pension schemes and pension funds into industrial investment? Surely the trustees of a pension fund know what is the best form of investment in the interests of their beneficiaries. Indeed, investment in property has been shown by the trustees of the many pension funds to be particu-

larly appropriate for the funds they have to administer. But still we have no concession at all in the Bill for the pension funds, and no recognition of the harm which this tax will do to the beneficiaries of pension funds and the undertakings which employ them.

We shall show in the Lobby our disgust for the imposition of this tax upon the provision of pensions.

Question put, That the clause be read a Second time:—

The House divided: Ayes 267, Noes 283.

Division No. 192.]
AYES
[5.23 p.m.


Adley, Robert
Emery, Peter
Johnston, Russell (Inverness)


Aitken, Jonathan
Ewing, Mrs Winifred (Moray)
Jones, Arthur (Daventry)


Alison, Michael
Eyre, Reginald
Jopling, Michael


Amery, Rt Hon Julian
Fairbairn, Nicholas
Joseph, Rt Hon Sir Keith


Arnold, Tom
Fairgrieve, Russell
Kaberry, Sir Donald


Atkins, Rt Hon H. (Spelthorne)
Farr, John
Kershaw, Anthony


Awdry, Daniel
Fell, Anthony
Kimball, Marcus


Bain, Mrs Margaret
Fisher, Sir Nigel
King, Evelyn (South Dorset)


Baker, Kenneth
Fletcher-Cooke. Charles
King, Tom (Bridgwater)


Banks, Robert
Fookes, Miss Janet
Kitson, Sir Timothy


Beith, A. J.
Forman, Nigel
Knight, Mrs Jill


Bell, Ronald
Fox, Marcus
Knox, David


Bennett, Dr Reginald (Fareham)
Fraser, Rt Hon H. (Stafford &amp; St)
Lamont, Norman


Berry, Hon Anthony
Fry, Peter
Lane, David


Biffen, John
Galbraith, Hon. T. G. D.
Langford-Holt, Sir John


Biggs-Davison, John
Gardiner, George (Reigate)
Latham, Michael (Melton)


Blaker, Peter
Gardner, Edward (S Fylde)
Lawrence, Ivan


Boscawen, Hon Robert
Gilmour, Rt Hon Ian (Chesham)
Lawson, Nigel


Bottomley, Peter
Gilmour, Sir John (East Fife)
Le Marchant, Spencer


Bowden, A. (Brighton, Kemptown)
Glyn, Dr Alan
Lester, Jim (Beeston)


Boyson, Dr Rhodes (Brent)
Goodhart, Philip
Lewis, Kenneth (Rutland)


Bradford, Rev Robert
Goodhew, Victor
Lloyd, Ian


Braine, Sir Bernard
Goodlad, Alastair
Loveridge, John


Brittan, Leon
Gorst, John
Luce, Richard


Brocklebank-Fowler, c.
Gow, Ian (Eastbourne)
MacCormick, Iain


Brotherton, Michael
Gower, Sir Raymond (Barry)
McCrindle, Robert


Brown, Sir Edward (Bath)
Grant, Anthony (Harrow C)
McCusker, H.


Bryan, Sir Paul
Gray, Hamish
Macfarlane, Neil


Buchanan-Smith, Alick
Griffiths, Eldon
MacGregor, John


Buck, Antony
Grimond, Rt Hon J.
Macmillan, Rt Hon M. (Farnham)


Budgen, Nick
Grist, Ian
McNair-Wilson, M. (Newbury)


Bulmer, Esmond
Grylls, Michael
McNair-Wilson, P. (New Forest)


Burden, F. A.
Hall, Sir John
Madel, David


Butler, Adam (Bosworth)
Hamilton, Michael (Salisbury)
Marshall, Michael (Arundel)


Carlisle, Mark
Hampson, Dr Keith
Marten, Nell


Chalker, Mrs Lynda
Hannam, John
Mates, Michael


Channon, Paul
Harvie Anderson, Rt Hon Miss
Mather, Carol


Clark, Alan (Plymouth, Sutton)
Hastings, Stephen
Maude, Angus


Clegg, Walter
Havers, Sir Michael
Maudling, Rt Hon Reginald


Cockcroft, John
Hawkins, Paul
Mawby, Ray


Cooke, Robert (Bristol W)
Hayhoe, Barney



Cope, John
Heseltine, Michael
Maxwell-Hyslop, Robin


Cordle, John H.
Hicks, Robert
Mayhew, Patrick


Cormack, Patrick
Higgins, Terence L.
Meyer, Sir Anthony


Corrie, John
Holland, Philip
Miller, Hal (Bromsgrove)


Crawford, Douglas
Hordern, Peter
Mills, Peter


Critchley, Julian
Howe, Rt Hon Sir Geoffrey
Mitchell, David (Basingstoke)


Crouch, David
Howell, David (Guildford)
Moate, Roger


Davies, Rt Hon J. (Knutsford)
Howell, Ralph (North Norfolk)
Molyneaux, James


Dean, Paul (N Somerset)
Howells, Geraint (Cardigan)
Monro, Hector


Dodsworth, Geoffrey
Hunt, David (Wirral)
Montgomery, Fergus


Douglas-Hamilton, Lord James
Hunt, John
Moore, John (Croydon C)


Drayson, Burnaby
Hurd, Douglas
More, Jasper (Ludlow)


du Cann, Rt Hon Edward
Hutchison, Michael Clark
Morgan, Geraint


Dunlop, John
Irving, Charles (Cheltenham)
Morris, Michael (Northampton S)


Durant, Tony
James, David
Morrison, Charles (Devizes)


Dykes, Hugh
Jenkin, Rt Hon P. (Wanst'd &amp; W'dfd)
Morrison, Hon Peter (Chester)


Edwards, Nicholas (Pembroke)
Jessel, Toby
Mudd, David


Elliott, Sir William
Johnson Smith, G. (E Grinstead)
Neave, Airey




Nelson, Anthony
Roberts, Wyn (Conway)
Tapsell, Peter


Neubert, Michael
Rodgers, Sir John (Sevenoaks)
Taylor, R. (Croydon NW)


Newton, Tony
Ross, Stephen (Isle of Wight)
Taylor, Teddy (Cathcart)


Normanton, Tom
Ross, William (Londonderry)
Tebbit, Norman


Nott, John
Rossi, Hugh (Hornsey)
Temple-Morris, Peter


Onslow, Cranley
Rost, Peter (SE Derbyshire)
Thatcher, Rt Hon Margaret


Oppenheim, Mrs Sally
Royle, Sir Anthony
Thomas, Rt Hon P. (Hendon S)


Page, John (Harrow West)
Sainsbury, Tim
Thompson, George


Page, Rt Hon R. Graham (Crosby)
St. John-Steves, Norman
Thorpe, Rt Hon Jeremy (N Devon)


Parkinson, Cecil
Scott, Nicholas
Townsend, Cyril D.


Pattie, Geoffrey
Scott-Hopkins, James
Trotter, Neville


Penhaligon, David
Shaw, Giles (Pudsey)
Tugendhat, Christopher


Percival, Ian
Shelton, William (Streatham)
van Straubenzee, W. R.


Peyton, Rt Hon John
Shepherd, Colin
Vaughan, Dr Gerard


Pink, R. Bonner
Shersby, Michael
Viggers, Peter


Powell, Rt Hon J. Enoch
Silvester, Fred
Wakeham, John


Price, David (Eastleigh)
Sims, Roger
Walder, David (Clitheroe)


Prior, Rt Hon James
Sinclair, Sir George
Wall, Patrick


Pym, Rt Hon Francis
Skeet, T. H. H.
Walters, Dennis


Raison, Timothy
Smith, Cyril (Rochdale)
Weatherill, Bernard


Rathbone, Tim
Smith, Dudley (Warwick)
Wells, John


Rawlinson, Rt Hon Sir Peter
Spence, John
Whitelaw, Rt Hon William


Rees, Peter (Dover &amp; Deal)
Spicer, Michael (S Worcester)
Wiggin, Jerry


Rees-Davies, W. R.
Sproat, Iain
Wilson, Gordon (Dundee E)


Reid, George
Stainton, Keith
Wood, Rt Hon Richard


Renton, Rt Hon Sir D. (Hunts)
Stanbrook, Ivor
Young, Sir G. (Ealing, Acton)


Renton, Tim (Mid-Sussex)
Stanley, John
Younger, Hon George


Rhys Williams, Sir Brandon
Steel, David (Roxburgh)



Ridley, Hon Nicholas
Steen, Anthony (Wavertree)
TELLERS FOR THE AYES:


Ridsdale, Julian
Stewart, Donald (Western Isles)
Mr. W. Benyon and


Rifkind, Malcolm
Stewart, Ian (Hitchin)
Mr. Michael Roberts.


Rippon, Rt. Hon Geoffrey
Stradling Thomas, J.





NOES


Abse, Leo
Cunningham, Dr J. (Whiteh)
Hamilton, James (Bothwell)


Allaun, Frank
Dalyell, Tam
Hardy, Peter


Archer, Peter
Davidson, Arthur
Harrison, Walter (Wakefield)


Armstrong, Ernest
Davies, Bryan (Enfield N)
Hart, Rt Hon Judith


Ashley, Jack
Davies, Denzil (Llanelli)
Hattersley, Rt Hon Roy


Ashton, Joe
Davies, Ifor (Gower)
Hatton, Frank


Atkins, Ronald (Preston N)
Davis, Clinton (Hackney C)
Hayman, Mrs Helene


Atkinson, Norman
Deakins, Eric
Heffer, Eric S.


Bagier, Gordon A. T.
Dean, Joseph (Leeds West)
Hooley, Frank


Barnett, Guy (Greenwich)
de Freitas, Rt Hon Sir Geoffrey
Horam, John


Barnett, Rt Hon Joel (Heywood)
Dell, Rt Hon Edmund
Howell, Rt Hon Denis


Bates, Alf
Dempsey, James
Hoyle, Doug (Nelson)


Bean, R. E.
Doig, Peter
Huckfield, Les


Benn, Rt Hon Anthony Wedgwood
Dormand, J. D.
Hughes, Rt Hon C. (Anglesey)


Bennett, Andrew (Stockport N)
Douglas-Mann, Bruce
Hughes, Mark (Durham)


Bidwell, Sydney
Duffy, A. E. P.
Hughes, Robert (Aberdeen N)


Bishop, E. S.
Dunn, James A.
Hughes, Roy (Newport)


Blenkinsop, Arthur
Dunnett, Jack
Hunter, Adam


Boardman, H.
Dunwoody, Mrs Gwyneth
Irvine, Rt Hon Sir A. (Edge Hill)


Booth, Rt Hon Albert
Eadie, Alex
Irving, Rt Hon S. (Dartford)


Bottomley, Rt Hon Arthur
Edge, Geoff
Jackson, Colin (Brighouse)


Boyden, James (Bish Auck)
Edwards, Robert (Wolv SE)
Jackson, Miss Margaret (Lincoln)


Bradley, Tom
Ellis, John (Brigg &amp; Scun)
Janner, Greville


Bray, Dr Jeremy
Ellis, Tom (Wrexham)
Jay, Rt Hon Douglas


Brown, Hugh D. (Provan)
English, Michael
Jeger, Mrs Lena


Brown, Robert C. (Newcastle W)
Ennals, David
Jenkins, Hugh (Putney)


Brown, Ronald (Hackney S)
Evans, Fred (Caerphilly)
John, Brynmor


Buchan, Norman
Evans, Ioan (Aberdare)
Johnson, James (Hull West)


Buchanan, Richard
Ewing, Harry (Stirling)
Johnson, Walter (Derby S)


Butler, Mrs Joyce (Wood Green)
Fernyhough, Rt Hon E.
Jones, Dan (Burnley)


Callaghan, Jim (Middleton &amp; P)
Flannery, Martin
Judd, Frank


Campbell, Ian
Fletcher, Raymond (Ilkeston)
Kaufman, Gerald


Canavan, Dennis
Fletcher, Ted (Darlington)
Kelley, Richard


Cant, R. B.
Foot, Rt Hon Michael
Kerr, Russell


Carmichael, Neil
Ford, Ben
Kilroy-Silk, Robert


Carter, Ray
Forrester, John
Kinnock, Neil


Carter-Jones, Lewis
Fowler, Gerald (The Wrekin)
Lambie, David


Cartwright, John
Fraser, John (Lambeth, N'w'd)
Lamborn, Harry


Clemitson, Ivor
Freeson, Reginald
Lamond, James


Cocks, Michael (Bristol S)
Garrett, John (Norwich S)
Latham, Arthur (Paddington)


Cohen, Stanley
Garrett, W. E. (Wallsend)
Leadbitter, Ted


Coleman, Donald
George, Bruce
Lee, John


Colquhoun, Ms Maureen
Gilbert, Dr John
Lever, Rt Hon Harold


Cook, Robin F. (Edin C)
Ginsburg, David
Lewis, Ron (Carlisle)


Corbett, Robin
Golding, John
Lipton, Marcus


Cox, Thomas (Tooting)
Gould, Bryan
Litterick, Tom


Craigen, J. M. (Maryhill)
Gourlay, Harry
Lomas, Kenneth


Cronin, John
Grant, George (Morpeth)
Loyden, Eddie


Cryer, Bob
Grant, John (Islington C)
Lyons. Edward (Bradford W)


Cunningham, G. (Islington S)
Grocott, Bruce
Luard, Evan







Mabon, Dr J. Dickson
Parry, Robert
Summerskill, Hon Dr Shirley


McCartney, Hugh
Pavitt, Laurie
Swain, Thomas


McElhone, Frank
Peart, Rt Hon Fred
Taylor, Mrs Ann (Bolton W)


MacFarquhar, Roderick
Pendry, Tom
Thomas, Jeffrey (Abertillery)


McGuire, Michael (Ince)
Perry, Ernest
Thomas, Mike (Newcastle E)


Mackenzie, Gregor
Phipps, Dr Colin
Thomas, Ron (Bristol NW)


Mackintosh, John P.
Prentice, Rt Hon Reg
Thorne, Stan (Preston South)


Maclennan, Robert
Prescott, John
Tierney, Sydney


McMillan, Tom (Glasgow C)
Price, C. (Lewisham W)
Tinn, James


McNamara, Kevin
Price, William (Rugby)
Tomlinson, John


Madden, Max
Radice, Giles
Tomney, Frank


Magee, Bryan
Rees, Rt Hon Merlyn (Leeds S)
Torney, Tom


Mahon, Simon
Richardson, Miss Jo
Tuck, Raphael


Mallalleu, J. P. W.
Roberts, Albert (Normanton)
Urwin, T. W.


Marks, Kenneth
Roberts, Gwilym (Cannock)
Varley, Rt Hon Eric G.


Marquand, David
Robertson, John (Paisley)
Wainwright, Edwin (Dearne V)


Marshall, Dr Edmund (Goole)
Robinson, Geoffrey
Walden, Brian (B'ham, L'dyw'd)


Marshall, Jim (Leicester S)
Roderick, Caerwyn
Walker, Harold (Doncaster)


Mason, Rt Hon Roy
Rodgers, George (Chorley)
Walker, Terry (Kingswood)


Maynard, Miss Joan
Rodgers, William (Stockton)
Ward, Michael


Meacher, Michael
Rooker, J. W.
Watkins, David


Mellish, Rt Hon Robert
Ross, Rt. Hon W. (Kilmarnock)
Watkinson, John


Mendelson, John
Rowlands, Ted
Weetch, Ken


Mikardo, Ian
Sandelson, Neville
Weitzman, David


Millan, Bruce
Sedgemore, Brian
Wellbeloved, James


Miller, Mrs Millie (Ilford N)
Selby, Harry
White, Frank R. (Bury)


Mitchell, R. C. (Soton, Itchen)
Shaw, Arnold (Ilford South)
White, James (Pollok)


Molloy, William
Sheldon, Robert (Ashton-u-Lyne)
Whitehead, Phillip


Moonman, Eric
Shore, Rt Hon Peter
Whitlock, William


Morris, Alfred (Wythenshawe)
Short, Rt Hon E. (Newcastle C)
Willey, Rt Hon Frederick


Morris, Charles R. (Openshaw)
Short, Mrs Renée (Wolv NE)
Williams, Alan (Swansea W)


Morris, Rt Hon J.(Aberavon)
Silkin, Rt Hon John (Deptford)
Williams, Alan Lee (Hornch'ch)


Moyle, Roland
Silkin, Rt Hon S. C. (Dulwich)
Williams, Rt Hon Shirley (Hertford)


Mulley, Rt Hon Frederick
Sillars, James
Williams, Sir Thomas


Murray, Rt Hon Ronald King
Silverman, Julius
Wilson, Alexander (Hamilton)


Newens, Stanley
Skinner, Dennis
Wilson, Rt Hon H. (Huyton)


Noble, Mike
Small, William
Wilson, William (Coventry SE)


Ogden, Eric
Smith, John (N Lanarkshire)
Wise, Mrs Audrey


O'Halloran, Michael
Snape, Peter
Woodall, Alec


Orbach, Maurice
Spearing, Nigel
Woof, Robert


Orme, Rt Hon Stanley
Stallard, A. W.
Wrigglesworth, Ian


Ovenden, John
Stewart, Rt Hon M. (Fulham)
Young, David (Bolton E)


Owen, Dr David
Stoddart, David
TELLERS FOR THE NOES:


Palmer, Arthur
Strang, Gavin
Mr. Joseph Harper and


Park, George
Strauss, Rt Hon G. R.
Mr. Ted Graham.

Question accordingly negatived.

New Clause 7

RATE OF TAX

'(1) Subject to section 13 below, the rate of development land tax shall be such percentage between thirty and sixty as the Treasury may prescribe by statutory instrument a draft of which has been laid before and approved by a resolution of the Commons House of Parliament.

(2) The percentage so prescribed may vary in respect of the situation of the land and the kind of development.

(3) The Treasury shall not so prescribe any increases in such percentage more than once in any fiscal year'.—[Mr. Raison.]

Brought up, and read the First time.

Mr. Timothy Raison: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Oscar Murton): With this we are to discuss the following:

Amendment No. 1, in Clause 1, page 2, line 4, leave out subsection (3).

Amendment No. 242, in Clause 13, page 19, line 39, leave out '66⅔ per cent.' and insert:
'one-half of the percentage rate currently prescribed under section (Rate of Tax)'.

Amendment No. 243, in page 19, line 43, leave out '66⅔ per cent.' and insert:
'one-half of the percentage rate currently prescribed under section (Rate of Tax)'.

Mr. Raison: The aim of the clause is, first and above all, to provide for a realistic rate of taxation instead of the utterly deterrent rate proposed in the Bill. Secondly, the clause is designed to recognise the fairly wide variety of circumstances in which development can occur—a matter to which I shall return in a moment. Thirdly, it is, as a consequence of this, to limit the changes in tax which are permitted under the clause to once a year, because, although we argue that a greater degree of flexibility is desirable than is allowed at present, we recognise that, if the clause were to lead to constant chopping and changing in the rate, that would be adverse


because, obviously, people want as much stability as possible in these matters, although that has to be coupled with some kind of sensitivity to market conditions.
Amendment No. 1, which is part of the package that we are debating, would have the effect of deleting the present subsection in Clause 1 which defines the rate of 80 per cent., with the consequence that the whole of the tax rate would be dealt with in our new clause rather than, as at present, in Clause 1.
There are also two subsequent amendments, Nos. 242 and 243, which would have the effect of altering the present reduced rate for the smaller sizes of development, which stands at 66⅔ per cent. over the interim period up to March 1979, to half the level of the ordinary rate which we are now proposing. Obviously, it would be absurd to have a level of main tax of between 30 and 60 per cent. and to have the reduced tax standing at 66⅔ per cent. The House will recognise that this is a sensible consequence of what we are proposing.
On Second Reading I made it clear that the Opposition had a number of major objections to and doubts about the Bill and the clause that it embodied. Ever since 1973 we have accepted the principle of a tax on betterment. The then. Chancellor of the Exchequer, now Lord Barber, decided that this was right, and we still accept that principle. We also want to avoid further upheavals, if possible. Although we shall unquestionably repeal the Community Land Act, we do not want to repeal this tax if—it is a big "if"—it can be made acceptable as a structure. Looking at the tax as a vehicle, we are not necessarily committed to its repeal. We shall judge it on its merits as it stands at the end of its passage through Parliament.
As the Bill stands at present, however, there are still a number of grave objections to the development land tax which it proposes to introduce. First, there is the objection, which has had a very full airing already, of the really absurd treatment given to charities and pension funds. I believe that my right hon. Friends and hon. Friends made an overwhelming case on this matter last night, and I cannot understand why the Minister ever resisted it. Then there is the sheer difficulty of

valuation which I think is a very important part of the problems which this tax poses. There is also the fact that a person may have to pay tax before his money comes in. Looking at the Committee stage report on this point, I think that the Minister was misleading when he tried to argue that there was nothing essentially different in the provisions of Clause 1 and the way in which tax is generally charged in our tax system.
It is certainly true that tax is charged before one's final income is known. I do not quarrel with that. But if one is overcharged, the money is refunded in due course. However, with development land tax we are talking about a fixed levy that does not depend on what gains are made. This is a very serious problem of the tax as it stands.
There are other objections also which have a lot to do with Clause 1. There is the fact that the cost and complexity of the scheme are enormous. There is the fact that builders who use land as stock-in-trade could receive very tough treatment, because they in a different category from the person who makes a windfall gain. Above all, the penal rate of tax of 80 per cent. for larger developments and 66⅔ per cent. for smaller developments will have disastrous consequences.
Not only will the 80 per cent. rate have disastrous consequences; as I should remind the House, this penal rate is only the first step in the progress towards a 100 per cent. rate of tax. Let us never forget that the essence of the Government's scheme is, in due course, that there should be no development gain at all to the person who brings land on to the market for the constructive purpose of helping to provide houses, factories, offices and shops. This is the first step on the Gadarene slide to tyranny that lies behind the whole of the Government's community land scheme. Our objections are very strong, because we are talking here about a starting point and not a final point of 80 per cent. Our new clause is designed to show that we reject the whole malign progress of this scheme. The proposed rate of 80 per cent. inevitably will be seriously damaging in its effect.
It is true that there may be land available for building today. I do not dispute


that the great difficulties the house building industry has faced in the last year or two, allied with bankruptcies and land being on the market, has meant that there is not a land famine at the moment. But among those who know the market best there is no question at all that in a year or two there could be a great danger of a famine. The House Building Federation, which speaks with great authority, believes that around 1978–79 we can expect the really alarming prospect of building land drying up, which will have a disastrous effect on house building. I know that this point has been referred to in Committee upstairs and on a number of other occasions in this Chamber by my hon. Friends. However, over and over again the Government have been thoroughly obtuse in brushing the matter to one side.
I suppose the Government could say that they could meet this situation by compulsory purchase. That is, indeed, the essence of the Government's land scheme. But compulsory purchase is not the way to hurry things along. It is not the quickest way of getting land on to the market; it is just the most odious and tyrannical way. Compulsory purchase cannot do the job, even if one accepts the moral or political aspect of it.
5.45 p.m.
We are faced here with a practical point, as well as a political one. The point has been made with great authority and force by the Royal Institution of Chartered Surveyors in its memorandum on development land tax. The institution speaks with authority, and it has always taken a very impartial view of this question. It is not aligned with any one political party and it represents people in both the public and private sectors. This is what the Institution had to say about the 80 per cent. rate of tax:
We must repeat here, with all possible emphasis, that a tax at an initial rate of 80 per cent. as now proposed by the Government, is bound to retard development and to prolong the present damaging hiatus in the building of houses, factories, shops and offices. This is to be deprecated, especially at a time when the Government's land scheme will be in its early stages. It is not irrelevant to note that the first attempt to recover 100 per cent. of development value, under the Town and Country Planning Act 1947, failed. This lesson was not lost on the authors of the Land Commission Act 1967, which introduced

a levy at an initial rate of only 40 per cent. of development value. We fear that the latest legislation in its proposed form will encounter the same difficulties as the 1947 Act.
Those are the words of great authority and I am amazed if the Minister can repudiate them in any way.
On the point about the community land scheme, even if it went ahead as a mechanism for buying land for development, the public expenditure situation would not allow the Government to spend the large sums of public money which would be needed to operate the scheme. In fact, the Government must be embarrassed by the cost according to the public expenditure White Paper. I beg the Minister to recognise this point and to realise that the 80 per cent. will be a deterrent.
What is the answer? What is the right way to approach this problem? We have put forward a way in our new clause. We may be asked what we shall do about it when we come to power. This is a fair question, but it would be foolish to answer it at this stage and say what tax rate we would operate, because no one can know the circumstances that will prevail. That is why we have produced a flexible system and applied commonsense practicality to the situation. We are setting up a broad pragmatic framework within which the Government can operate.
In Committee we put forward one approach in which we argued for a rate of 60 per cent. tax or less, subject to Statutory Instrument. There was a lot to be said for that approach. But one cannot repeat that on the Floor of the House. The approach that we are putting forward today has a great deal of merit and it will provide a viable system. We are putting forward a scheme that allows considerable flexibility and considerable opportunity for the Government to make a judgment about the existing state of the market and its revenue needs.
There is a substantial sum of money at stake in the Bill. On Second Reading the Minister told us that the likely revenue from the Bill would be between £200 million and £300 million. I am not sure whether the Minister has elucidated this since, or whether he still sticks to those figures, but he must admit that this is quite a sum of money. Nevertheless, it is the land market about which we must


be most concerned, and the market for housing and other forms of productive investment.
The clause would allow the Government to propose by Statutory Instrument, which would have to be approved by the House, whatever level of taxation they believed to be right within the range between 30 per cent. and 60 per cent. That is a wide range for a tax, but it allows a sensitive approach. It allows us to consider the balance between supply and demand in the land market which is a volatile market and is subject to all sorts of extraneous factors. We say that the rate should not go above 60 per cent. because there is now a fairly strong body of opinion which says that 60 per cent. is the upper limit at which the tax could operate before beginning to deter people from putting land on the market.
I shall not fix the precise figure for the tax, because that is the Government's job. Initially, however, it might be between 50 per cent. and 60 per cent., but I am not putting that forward specifically. It might be related to the level of corporation tax. All I am asking is for the Government to recognise that they have landed themselves in an impossibly rigid situation. The Government have never explained why they plumped for 80 per cent. Throughout, they have been very coy on that point, and the only explanation seems to be that they are aiming ultimately for 100 per cent. and therefore they have to pitch the rate high so that the final jump is not too great.

Mr. Denzil Davies: Will the hon. Member make one point clear to the House? Am I right in assuming that he is asking us to approve the clause and to include it in the Bill? Is he saying that, because so far he has made a Second Reading Speech?

Mr. Raison: Yes, I am asking the House to approve the clause and to include it in the Bill. It embodies a sensible approach, which is very much better than the approach adopted by the Government. There is a range of tax levels that we believe to be right. All the evidence points to the need for a far lower rate than the 80 per cent. proposed by the Government.
The clause makes it possible to meet another objection to the Bill concerning

the insensitivity of the Government's approach to the fact that there are quite different forms of development. The clause would make it possible to vary the tax in respect of the particular situation of the land and the kind of development proposed. That will allow a response to different circumstances, and it will give a chance to stimulate the market as a whole, or just one part of it, if necessary. There are different geographical circumstances. It may be that in one part of the country things are tight and that in another part the situation is completely different. It may be that one would apply the flexibility not just to geographical variations but to variations between different forms of development. For example, one could draw a distinction between house building and other development, or between commercial and industrial development. It is quite clear that at any given time the house building sector might be thriving while there is a slump in commercial and industrial development.

Mr. Fairbairn: Lest the Government should burst too many blood vessels, perhaps I should explain to my hon. Friend that we have been at pains to abolish the distinction between commercial and industrial.

Mr. Raison: I am simply putting forward the kind of possibilities that would be permitted. The proposal might help different parts of the country It might make sense to provide a lower rate of tax to encourage land on to the market for development in the urban areas. The Government are probably concerned about the prospects for development in some of our urban areas, and I would have thought that the Minister for Planning and Local Government, who is now with us, would be sympathetic and responsive to proposals that would make it possible to stimulate development in areas which at the moment look as though they will be ignored under present trends.
I believe that the clause will achieve a desirable flexibility, which will take proper account of the variations in the market and the variations of different parts of the country. Of course, one would have to use that flexibility carefully. I do not want to end up in a position of arguing that legislation should have an endless variety of provisions to


cover special conditions. Here, however, we are talking about wide categories of development which might be treated under our proposals rather than by the preferential interventionism which is characteristic of the Government's policy.

Mr. Budgen: If the clause became law, what would happen in the event of a political hue and cry about one kind of development or one developer? Would it be possible to introduce, by way of Statutory Instrument, a penal rate of tax to demonstrate the political dislike of one type of development, or even one developer?

Mr. Raison: That is something that we shall have to think about. One cannot discriminate against one developer, because that would land us in hybrid Bill difficulties, and we have been there before.

Mr. Budgen: But would it be possible?

Mr. Raison: It would require the approval of the House of Commons. We are talking about the affirmative resolution procedure. If the House thought that that suggestion was inappropriate it could throw it out.

Mr. Denzil Davies: There is nothing in the clause about the affirmative resolution procedure applying to a specific situation or particular kind of development. That would be entirely a matter for executive action, which would be taken under guidelines set out by the Treasury. The matter would be left totally to the Executive, as to how to deal with certain types of development.

Mr. Raison: Everything that was done would be done under a resolution or order of the House, and the House would be able to approve a scheme.
I believe that our package as a whole provides a basis for pragmatic and sensible approach to a very difficult question. The Government's proposals will never work, as has been widely accepted for the last few months. If I were the Minister I would welcome the scheme that we are putting forward. It gives some chance of making the unworkable work. But, above all, I tell the Government that they must get away from the notion of an 80 per cent. tax rising to 100 per cent., because that is doomed to failure.

6 p.m.

Mr. Clegg: I wish to support the new clause. I think that there should be a tax on profits made out of land, but I dislike intensely the way the Bill has gone through the House and its close connection with the Community Land Act. Had the Treasury been left to introduce a tax on development without it having to be tied to the Act, we should have had a much more palatable Bill.
I am concerned at the effect that a rate as high as 80 per cent. will have on house building. One must listen to the views of the Royal Institution of Chartered Surveyors with respect. Its members deal with these matters daily, and they feel that a tax at that rate will harm the provision of houses and industrial and other buildings. Their case is borne out by the fact that there are exemptions for the first three years and provision for a tax rate of 66⅔ per cent. It is obvious that the Government and particularly the Department of the Environment are frightened of the effect that an 80 per cent. tax would have if it were applied from the beginning.
Developers with land banks, which are exempt, will obviously continue to develop them, but we are concerned about what will happen when the land banks run out. Builders will have to go to local authorities, who will be controlling all the land banks, and buy land at a very high price.
Some builders and developers have made what the Minister has described as windfall gains by buying land and then getting planning permission for it. It is right that they should pay tax on part of the increased value, but we must consider the effect of an 80 per cent. rate. There must be something in it for the builder and the developer. Many outside bodies have argued that if a person goes into a risk-taking operation he should be allowed to keep a little more than 20 per cent. of the increased value of the land. Eventually, he may have to pay 100 per cent. in tax.
These rates will obviously discourage developers from taking risks. There is a risk in every development, whether it is carried out by a local authority, a developer, or by the two together. I assume it will happen increasingly under the Community Land Act. If one does not allow the developer to keep part of


the profits there will be less development and fewer houses. I think the country wants a tax of this sort, but people believe that it should be at a moderate rate. Otherwise the people themselves will suffer in the end.
The rates have been fixed at 80 per cent. and 100 per cent., not for taxation, in the sense that it is generally understood by the Treasury, but in order to fund the operation of the Community Land Act. The Government are relying on high profits to pay for the 14,000 extra civil servants and the running of the scheme. This money must be raised to repay the formidable borrowing which will be needed, but there are grave and serious dangers in doing it this way.

Mr. Michael Spicer: I support the new clause, but only as a poor second best to a commitment to repeal the tax. I must make that point in the discussion of a proposition that the tax should be lowered. My hon. Friend the Member for Aylesbury (Mr. Raison) was quite right to make general points in this context and the Minister was wrong to cast aspersions on them.
I do not support all the wording of the new clause. I cannot go along with the argument that the tax should be written into a Bill which has the power to discriminate between different sectors. I argued passionately yesterday against the Government's intention to discriminate between different sectors. I said that the discriminatory powers in the Bill were a bad thing. Therefore I cannot go along with the whole of the new clause, but I support it because it makes the important point that, at the very least, we should be considering a much lower level of tax, even though that is a poor alternative to replacing it with a different tax.
The Government's aim is to raise the rate to 100 per cent. and then to nationalise all development land. In their mind, this is just a transitory process. A figure of 80 per cent. is as good as any other and it is only 20 per cent. off the final objective.
As my hon. Friend the Member for Aylesbury said, we have here not only a swingeing tax, but a totally new form of taxation. It is the combination of

these elements which is objectionable and to which the new clause is addressed. The fundamental difference between this tax and any other is that it is a tax upon hypothetical values. In certain respects it is a tax upon nothing, and this leads proponents of the tax into very difficult paths.

Mr. Fairbairn: Is my hon. Friend aware that it is worse than a tax on nothing? It is frequently a tax on a loss of benefit which a person did not wish to lose in the first place.

Mr. Spicer: That is a fair and important point which underlines the seriousness of this new form of taxation.
There are a number of problems associated with a tax based upon hypothetical values. Because these factors exist, I believe that we must seek to bring down the rate of the tax. The first point is a simple one, namely, that since the Government have introduced the tax on a somewhat hypothetical calculation of betterment they have not been able, as with other taxes, to permit it to be made possible within the legislation for the taxpayer to deduct or allow for situations where there is a loss in terms of value. Unlike every other kind of tax, where one taxes genuine gains and can identify gains and losses, the balance of loss against gain is something which a hypothetical tax of the kind envisaged in the Bill is unable to accommodate. This is a reason why we must consider very carefully the question of the rate at which the tax is to be assessed.
Secondly, because we have this set of hypothetical notion based on hypothetical calculations, it is far more difficult than with other forms of tax to allow for the pace of inflation. Inflation in the last 20 years has run at a rate of 227 per cent. Therefore, we are talking about a tax whose calculations go well back into history.
If we try to assess the basis of the tax we see that it is a tax not only for chartered surveyors and lawyers but for chartered historians. Because of its complexity, and because it is based on totally notional values, it will make a great deal of money for those people whose business it is to assist the taxpayer and to compute what it is all about.
Since it is a tax based on a hypothesis, no doubt later this evening, when we


come to the subject of inflation, the Government will argue that, because of all the notional values associated with the assessment of tax, it is impossible in this case to allow for inflation in the assessment of the tax and of the original costs incurred by the taxpayer. That is the second reason why, in these highly inflationary times, a tax based on notional concepts of value is particularly pernicious.
The third factor which must be allowed for in the rate at which the tax is assessed is the sheer complexity of the matter. Obviously we have a Minister who is extremely able in pushing through this Bill, but it must be said that, despite his ability and great knowledge of tax matters, in Committee he occasionally resorted to the honourable tactic of falling back on the formula "I shall take advice on the matter." Obviously, even the Minister of State has not a total comprehension of the Bill. How much more difficult will it be in the world outside for the taxpayer, the man who will be clobbered by the Bill, to understand what it is all about? Because of this situation there may be certain dangerous effects. We have in this Bill a complex piece of legislation that will result in a mass of circulars being issued after the Bill is enacted merely to explain its provisions.
I do not wish to pursue that point, but I wish to emphasise that because of the complexity of this measure the taxpayer will face a mass of costs, most of which are not allowable, in trying to work out what on earth this piece of legislation means for him. Since it will be an extremely expensive matter for the taxpayer to assess his liability to tax—and in many cases this will affect not large corporations but individuals—taxpayers will want to work out whether they fall within the exemption.
6.15 p.m.
Therefore, it would seem reasonable, if the objective is to be reasonable, that a rate of tax should be set well below that which we are now contemplating. We must consider the costs to the taxpayer of working out notional values in this totally new fiscal environment. Surely for that reason alone the rates should be reduced. I repeat that with this tax we are entering a totally new world, a world of unknown values, where the gains have not been made. Indeed, we are entering a new Socialist world.

Mr. Denzil Davies: The hon. Gentleman says that we are entering a new Socialist world, but does he not realise that if the clause were accepted we should go even further into the new Socialist world which he describes?

Mr. Spicer: I do not like the discriminatory element in the Bill. I believe that the tax should be set at a considerably lower level. Obviously, the Government like this new world. It is a world into which they are heading with great rapidity, and consciously as part of their legislation towards a total State control of all development land. Therefore, to the Government a figure of 80 per cent. is generous and 60 per cent. is even more generous because it is that much less than 100 per cent.
That is not how we see the matter. We see it as preventing the development in a free society, of the free use of land. What is worse is that the tax is based on concepts that are unknown in previous tax law. If we are not to repeal this tax, we must at least ensure that it is at a level that will not forever stifle private initiative.

Mr. Durant: I intervene in this debate because I was involved in the passage of the Community Land Bill. During that hot summer a year ago we were discussing the same type of legislation as that contained in the present Bill, and indeed this is a follow-on to those provisions. Incidentally, I am surprised to see so few Labour Members present for these debates. After all, the Chamber is the coolest place in the Palace of Westminster. At least hon. Members can come in and take the fresh air.
I support the general principles behind the clause because I believe that the rate of tax as laid down in the Bill is too high. It will stifle the bringing forward of development land. In the end, the only step that will be taken will be that of compulsory purchase, involving as it does, many inquiries, time factors and other considerations affecting development. I ask the Minister whether these considerations could form part of the budgetary procedure on an annual basis, in order to give people a regular basis on which to operate.

Mr. Denzil Davies: Does the hon. Gentleman agree that the new clause


spells out different rates for different developments in different parts of the country?

Mr. Durant: I think I do in general terms. There are different situations in different parts of the country. My hon. Friend the Member for Aylesbury (Mr. Raison) mentioned the fact that land will dry up. In my part of the country a shortage is already beginning to appear, because there has been an expansion of house building in the South. A shortage is beginning to appear in that part of the country which might not have appeared elsewhere. I do not think it is necessarily wrong to have different rates in different areas. After all, we do this in respect of housing in general and I do not see anything wrong with it.
I think what will happen if the Bill goes through as it stands is that owners will tend to wait and sit on their land, in the hope that prices will rise so that they will virtually be able to cover the tax. They may take the attitude that if they wait for another year they will get what they originally expected. Once again we shall have a time lag, delay and lack of development. That is what worries me about the Bill.
In respect of the builders themselves, many small builders with plots of land which have accumulated may well be told, when asking for planning permission, that the individual plots are not a good development. The planning authority may suggest that it would be better to make a more comprehensive development by acquiring more land. But there may be problems in doing that. The builder may not want to start the whole scheme. Again, there will be delay and the land will lie dormant. We have seen many examples of this. There are many areas in which there is dormant land, and that is another deterrent to getting on with development, improvements and the building of houses and factories, and so on.
We have already had debates on charities and pension funds. I was involved with the Community Land Bill, and when I heard the debates in respect of this Bill it sounded as if we were going through the whole thing again. Almost the same arguments were put forward but at least, in respect of the Com-

munity Land Act, we were discussing something slightly different. However, in respect of charities and pensions, I would make the point that if there were a lower rate of tax it would at least soften the blow. A lower rate of tax would not hit people as hard as would an 80 per cent. rate. We must remember that ordinary people are involved. In the end we are left with more compulsory purchase, with all the rigmarole that involves.
It is typical of the thinking of the Labour Party that it will introduce a tax to gather money from the community in order to spend that money to do the very things that the private sector could do anyway. The only problem is that a little bit of the money is lost on the way in administration. All of it is not put into development. Somewhere along the line there are administrative expenses and, as a result, the community does not get the full benefit.
I think that the rate of 80 per cent. is too high. I honestly believe that it will result in a shortage of land. We shall have to use compulsory purchase to get that land in order to have it developed. There will be a lack of availability of land, and builders will have difficulties in acquiring land. The whole thing will result in a slowing down of home building and of town centre development. The effect will be to create a tremendous deterrent to the very thing which all of us want to see, and that is a better society.

Mr. Fairbairn: The question of the rate of the tax raises the whole principle upon which the Bill is founded. It arises from the fallacy on which the Minister has had to rely in trying to defend the concept of the Bill—that the community has bestowed upon members of the public something to which they are un-entitled and that it is the duty of the community, whoever they are, in the form of the bureaucracy, to take back from the individual what belongs to the generality. This inevitably has happened in all situations where bureaucracies have removed something from the individual to bestow it on the generality.
We are running into that difficulty in one of the most complicated measures that this House has ever been stupid enough to conceive of passing. We are running into the difficulty, perhaps, of misusing the word "tax". It is a simple


word, three letters ending in "x". There are, Mr. Speaker, other three-letter words ending in "x", which are also simple words, and of which you may or may not have heard. I think it was Benjamin Franklin who said that
nothing can be said to be certain, except death and taxes.
We are considering a tax rate of 80 per cent. which, in fact, slips decently into a tax rate of 100 per cent. I think it is a misuse of the word "tax" to call it taxation. It is confiscation. It is the removal of the whole. Let us be absolutely clear when we are considering this matter that we are doing so with all the generous Socialist principles which the Minister has so reluctantly advanced, such as "The community gives and the community takes away".
However, this tax applies to people who receive a disadvantage from the community. If they live in a house and all around there are built coal mines, oil wells and office blocks and they spend their life's income in public inquiries objecting to each one and failing, nevertheless they will have to pay 80 per cent. and then 100 per cent. for the great benefit of having all those wretched things around them which have resulted in what is called an improvement in their property.
Far from the community bestowing a benefit, it is a tax on disadvantage. If, for instance, a road is put through someone's garden which he does not want and he is paid compensation, that is subject to tax. He is compensated, and then the compensation is removed as if it were a benefit. That is the iniquity of this tax. It is 80 per cent., but let it never be forgotten that it is sliding into 100 per cent. That is its purpose. It is total confiscation. That is the concept, which is somehow founded on the Socialist philosophy that profit, benefit or improvement is all wrong. It is so wrong that it must be removed from individuals and squandered in public.
I was interested in the Minister, who is an honest man—

Mr. Budgen: He was.

Mr. Fairbairn: No, he is a Welshman and, therefore, he is an honest man. I was very interested when he said to my hon. Friend the Member for Worcester-

shire, South (Mr. Spicer) that the new clause would take us into an even more Socialist world. I was interested that he used the word "Socialist" as a derogatory adjective. What he said was that we would make the world "even more" Socialist, with more bureaucrats and more complications. That was the argument.

Mr. Michael Spicer: Is not the point that there has been a certain growing defensiveness from Labour Members about their principles? When we were discussing charities and saying that they were something which fitted in with the Socialist principles of nationalisation, they seemed to show a lack of confidence in their principles.

6.30 p.m.

Mr. Fairbairn: I am obliged. I did not want to say anything which would cause the Minister to lose the job he is doing so well, but throughout our debates today and in Committee I have felt that he is not committed to the principles of Socialism and certainly not to the frightfulness of the Bill. But he is doing his job as we would expect every member of such a learned profession and so pure a race to do it.
What I find particularly disturbing about the rate of the tax is that it is a rate on a piece of speculative arithmetic. People have to work out a long and complicated formula about what would allegedly have been the case if something had happened and now will be the case if something else happens in future. It is the fact that so high a rate is based on a fiction which makes it so improper.
This Government have presided—I know they believe that it is entirely the fault of the opposition—over a rate of inflation of about 25 per cent. I regret to say that the Chancellor of the Exchequer—he is not a Welshman, although he sits for a Welsh seat—has not persuaded me that it is likely that inflation will disappear under his charm—

Mr. Speaker: Order. I was so grateful for all the earlier complimentary remarks about Welshmen that I would not like a mistake to creep in. One would not say that the Chancellor had nothing to do with Wales, but he does not directly represent it.

Mr. Fairbairn: I apologise. I was thinking that he sat for Leek when, of course, he sits for Leeds.
I think that the inflation rate will continue at a high level. I do not see how, on any of the calculations in the Bill, the house owner, the property owner, the small business man or the shopkeeper can sensibly be protected against inflation if we leave him only 20 per cent., over however many years it may have developed, of what is said in Clause 1 to be the development value of the land. That is a spurious concept which may have been created by one's neighbours or by authorities or even against one's will. Yet one is to be taxed at this absurd rate for the privilege.
It is a dangerous innovation to introduce a standard fixed high rate of tax in a Bill which would require to be amended or repealed if the rate were to be changed. There is no provision for any change in the tax apart from the fact that it will become 100 per cent. on that wonderful deemed day, no doubt in 1984, when we shall all live happily ever after on Animal Farm. It seems to me to be infinitely more sensible—I ask the Minister to consider this as he has considered previous new clauses—to regulate this matter in the Finance Bill from year to year. It is arrogant of us to assume that we comprehend what the property market, the development of land and the effect of the Bill will be so far ahead that we can base a statute on a particular rate for all time.
The 80 per cent. rate is simply a figure picked from the air. No one said that 79 would be too low and 81 would be too high, or that 60, 63 or 66 would not be good. It is purely a rate picked from the air with no sensible consideration, argument or justification—except that it is nearer to 100 per cent. than any figure below it.

Mr. Denzil Davies: The hon. and learned Gentleman, as usual, is making an interesting speech. Will he now tell us whether he supports the new clause?

Mr. Fairbairn: I am disturbed to think that the Minister should be worried about whether I support the new clause. Indeed I support it, because it makes it possible to vary, though not to raise,

the tax more than once a year, according to circumstances. It could be put down more than once a year. That is a habit that Treasury Ministers might adopt to advantage. It is not a new idea, but, if the Minister is willing to take it up, the idea of putting tax down more than once a year and never raising it more than once a year might even commend itself to the electors. One might run into difficulties if one made different selections of land, but I am happy that the Minister should have a nil rate in Wales if he is willing to acknowledge a nil rate in Scotland.
The rate of tax was won by the Government in Committee on only one vote, in the magnificent absence of the hon Member for Perth and East Perthshire (Mr. Crawford), who once again is so concerned for the fate of the rate which is to be paid in his constituency, which consists of little other than land, that he is not here today. He is away with all his colleagues concerning himself with all the matters which constantly keep them out of Committee and out of this Chamber. Devoted to their diligence, we are reluctant to have to note their absence.
It is not sensible to have the same rate for Tottenham Court Road as in the wilds of my constituency. We are taxing totally different concepts. I hope that the local authority in my area will have as much difficulty as I have in understanding any part of the Bill and that, therefore, the tax will never be collected.
This is a bad and incomprehensible Bill, based on a bad and bogus principle in which the Minister does not believe. I give him credit for pretending to do so occasionally. I hope he will ensure that the rate is reduced or varied.

Mr. Stephen Ross: We seem to have had some peculiar speeches from this side of the House, both yesterday and while I have been here today—particularly that of the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn). We are now hearing from the Opposition a suggestion for a further variation of the rate of tax which should be applied.
Originally, I understand, the Opposition went along with the figure fixed by the chartered surveyors of 66 per cent. in their publication, which has been


recognised as a worthy contribution to the land problem. Later they reduced it to 60 per cent. On Second Reading the percentage was suddenly reduced by them to 52. Now, it is varying between 30 and 60. We are entitled to know the Tory solution to the problem of betterment in land.

Mr. Budgen: What is the Liberal one?

Mr. Ross: I will give that with pleasure in a moment.
Do the Tories really want to return to the situation of three years ago? Do they believe that the public would accept similar massive gains on land transactions? During that period, clients were coming to me with queries about land transactions. One had had an offer of £280,000 for a five-acre plot in the New Forest. When I said that he would be taxed at £70,000, he said he would not sell it. I pointed out that he would make a clear gain of over £200,000, which was surely enough to be going on with, but he did not agree.

Mr. Fairbairn: Does not the hon. Gentleman appreciate that the purport of the Bill is to put an 80 per cent. tax on development in Mrs. MacGregor's garden, and that of anyone else, to prevent any abuse?

Mr. Ross: That is not correct. The hon. and learned Gentleman obviously does not understand all the provisions of the Bill. There are exemptions. There is a £10,000 exemption on gains, which are not taxed. There are exemptions in respect of small builders. There is a 66⅔ per cent. rate for three years on gains of up to £150,000. I suggest that £150,000 is a big gain. The hon. and learned Gentleman may not agree. I do not understand why there should be a variable tax. How would a professional person face up to a client who had just sold a parcel of land which it was known would be subject to the 66⅔ per cent. rate and who found that the Government had suddenly reduced the rate to 35 per cent.? I would be indignant if I found myself in that position. There will be all kinds of gambles and swindles to try to change the date of the transaction.

Mr. Durant: I accept the underlying view on the matter of the change in rate It is not unknown for Governments to change tax rates. That occurred with VAT.

Mr. Ross: I could not agree more. But surely all Members of Parliament agree that we want stability. People want to know where they stand—especially those in property development.
I think that people are beginning to accept the concept of the Community Land Act. However, I was sad to hear the hon. Member for Aylesbury (Mr. Raison) say that the Conservatives would repeal that Act. If we are to go over all this again, that is a dismal prospect. The hon. Gentleman said that the Conservative Party might be able to go along with the development land tax, but with some amendments. I welcome that. However, if it is intended to repeal the Community Land Act, the future is grim. I do not agree with some aspects of the Community Land Act, although I think that the Act may work in a regional context. It would be possible to have a variable tax if there were a regional government structure in this country. Presumably there might be a variable tax if there were Scottish or Welsh Assemblies.

Mr. Fairbairn: No, Sir.

Mr. Ross: The hon. and learned Gentleman appears to be against a Scottish Parliament—although there might be a different rate of taxation in Scotland. I am all for giving a further choice in these matters to local areas.

Mr. Michael Spicer: Is the hon. Gentleman saying that the Liberal Party is in favour of the nationalisation of all development land? If not, will he say what the Liberal Party is in favour of doing?

Mr. Ross: The policy of the Liberal Party has been known for more than 50 years. We advocate site value taxation.
I said in my speech on the Community Land Act that the right way to solve this problem was to impose a site value tax immediately planning consent was given. That would have the desirable effect of bringing the land on to the market. The tax might be levied at a variable rate according to the time the


and was left undeveloped. There might be delays in its imposition according to whether the services were available or whether there was a slump in land sales. There would be an appeals procedure. The tax could be levied at the rate of 30 per cent. on the annual value, and the local authorities would receive the money. That would be a far better solution. Neither of the two principal parties has ever been prepared to accept that.
The Community Land Act is now on the statute book and we are faced with this problem. I do not think that we can turn the whole matter upside down. Therefore, I accept this measure.
I think that the Government would be better off to stick to the rate of 66⅔ per cent. all the way through, for as far ahead as we can see. I think that 80 per cent. is probably too high a rate, but I do not deny the Government's view that land ultimately should change hands at existing use value.

6.45 p.m.

Mr. Raison: Will the spokesman for the Liberal Party place on record whether he accepts the principle that local authorities should have a duty to acquire development land?

Mr. Ross: I made clear in the debate on the Community Land Act that I did not like the situation whereby local authorities were planners, purchasers and vendors. I accept that the proposals may work in a regional context. It is known that the Liberal Party believes in a regional government structure.

Mr. Fairbairn: The hon. Gentleman suggested that I was not in favour of a Scottish Parliament. I do not know what he meant by that. I am president of the Bangla Fife political party which believes in independence if the regional policies ever get off the ground.

Mr. Ross: If the hon. and learned Member ever becomes Prime Minister, I shall join the Vectis National Party, as I would be all for independence for the Isle of Wight.
The arguments adduced by Conservative Members of Parliament do not stand water. We are entitled to know a great deal more about what the Opposition, if they ever become the Government, will

do about taxing betterment. Their proposal for a variable tax is about the worst proposition that has come forward so far.

Mr. Budgen: I have listened with great interest to the debate. The Opposition's approach to the new clauses and amendments is based on two points. I entirely agree with the first. It is one to which I have always given my consistent and wholehearted support. It is based on the proposition that a rate of tax of 80 per cent. is a nonsense. My support is based on the proper Tory belief that we should attempt to work with people, not against people. It is based on the belief that people act according to their selfinterest—not their narrow self-Merest, but their long-term self-interest. If people discover that 80 per cent. of the development value of their land will be taken away from them, they simply will not sell the land.
It is not for us to argue whether 50 per cent. or 60 per cent. is the right tax rate. However, there is no doubt that 80 per cent. is too high a rate. It is so high that no normal person would be likely to sell his land unless it were extracted from him by the force of compulsory acquisition.
My hon. Friend the Member for Aylesbury (Mr. Raison) put the matter very well when in his speech on Second Reading he referred with his customary erudition to the works of Adam Smith. He said:
Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.
The second of Adam Smith's precepts quoted by my hon. Friend was the following:
High taxes, sometimes by diminishing the consumption of the taxed commodities, and sometimes by encouraging smuggling, frequently afford a smaller revenue to Government than what might be drawn from more moderate taxes. When the diminution of revenue is the effect of the diminution of consumption there can be but one remedy, and that is the lowering of the tax."—[Official Report, 15th March 1976; Vol. 907, c. 967.]
In that Second Reading debate I expressed my admiration for the works of Adam Smith. I reminded my hon. Friend of some of the other precepts of Adam Smith about the levying of taxation. When I heard him make his second point. I felt obliged to look at those


precepts again. With the greatest reluctance I found myself in less than wholehearted agreement because Adam Smith said:
The tax which each individual is bound to pay ought to be certain, and not arbitrary. The time of payment, the manner of payment, the quantity to be paid, ought all to be clear and plain to the contributor, and to every other person. Where it is otherwise, every person subject to the tax is put more or less in the power of the tax-gatherer, who can either aggravate the tax upon any obnoxious contributor"—
think of that, Harry Hyams—
or extort by the terror of such aggravation, some present or perquisite to himself. The uncertainty of taxation encourages the insolence and favours the corruption of an order of men who are naturally unpopular, even where they are neither insolent nor corrupt. The certainty of what every individual ought to pay is, in taxation, a matter of so great importance, that a very considerable degree of inequality, it appears, I believe, from the experience of all nations, is not near so great an evil as a very small degree of uncertainty.
Unhappily, however, I must concede that when I look at New Clause 7 an extraordinary degree of uncertainty seems to be proposed. I am grateful to my right hon. and hon. Friends for the procedural device upon which they have hit in raising this proposal for a variable tax as a means of bringing before the nation our deep distaste for this high and punitive rate of taxation. None the less, if we succeeded tonight this proposal would go on to the statute book and we should be left with what I call the 1972 Industry Act argument—"But it would be used only by people like us." The sad fact is that the insolence and the insolent power of the Government is something from which we should all attempt to protect the citizen.
I am against pragmatism in taxation. I am against flexibility in taxation. I am against a variable rate of tax which could be changed for than once in a fiscal year in relation to an industry with a production cycle of over five years.
For those reasons, though I agree wholeheartedly with all that my right hon. and hon. Friends have said about the rate of tax, I regret the procedural necessities that have obliged them to support a variable rate of tax. Therefore, I shall be unable to support my right hon. and hon. Friends in the Lobby.

Mr. Denzil Davies: I welcome the hon. Member for Aylesbury (Mr. Raison) to our debates again. He appeared at some time on Second Reading, or perhaps it was on the Ways and Means Resolution—I cannot remember—but he was not to be seen in Committee. Now he has come back, but he has brought with him a very strange animal. Perhaps if he had the benefit of studying our Committee deliberations he would not have brought the new clause before us.
I should like to put on record what the new clause stands for, because I gather that this is official Opposition policy and that the hon. Member for Aylesbury and his right hon. and hon. Friends will vote upon it, since I cannot possibly accept it. It is only right that those who read our debates should clearly see the present policy of the Opposition—it may not last very long—on the problem of taxing betterment.
I disagree with anybody who suggests that 80 per cent. is too high a rate, but we can sensibly argue about that. The new clause not only argues about the rate but now fixes different rates for different parts of the country and for different kinds of development.
I should remind the House how the Opposition seem to have moved regarding rates of taxation during the last four or five years. Originally it was 30 per cent. in the capital gains tax legislation. Lord Barber proposed a top rate of 75 per cent. for development gains tax. In the debate on Second Reading—or was it the Ways and Means Resolution?—it went down to 52 per cent. It was then 52 per cent. plus an infrastructure charge. It went up to 60 per cent. and again it went down. Now it is apparently between 30 per cent. and 60 per cent. The Opposition still have not made up their mind. Although the rate will have to vary from year to year, according to economic circumstances, the rate is important because to some extent it indicates the kind of tax that we want on the statute book to deal with the situation. It is not purely academic. It is bound up with the framework of the kind of tax that we believe to be right.
The Opposition now want a variable rate between 30 per cent. and 60 per cent. They also seem to want to change that rate by Statutory Instrument. Normally


we tax individuals through the legislative process. Now, however, the 90-minute debate on an affirmative resolution will be sufficient, according to the Opposition. Such 90-minute debates will be late at night. The official policy of the Opposition is to change the tax on development land up or down from 30 per cent. to 60 per cent. or from 60 per cent. to 30 per cent. or an intervening rate.
The affirmative resolution would contain not only a change of rate but other things. It would designate the rate for Aylesbury. Apparently it will be 30 per cent. for Aylesbury and 40 per cent. for Wolverhampton, South-West. The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) is not in his place. I was going to say that the rate would be 60 per cent. on burgage property in that area. Land in Wales will carry a rate of 30 per cent. [Interruption.] I assure the Opposition that I am being serious. This is the new clause upon which the Opposition will vote in a few minutes' time. This is the kind of tax that has been proposed. The rate could be varied for different parts of the country.
I can imagine the lobbying that would go on. There would be queues of Members outside the Treasury. They would all suggest that, for example, 40 per cent. should be changed to 30 per cent. A great deal of bargaining would go on between representatives of pressure groups and the Executive about the rate of tax that should apply to development land in particular areas. Apart from the constitutional implications, which are enormous, great uncertainty would be created if there was flexibility regarding the betterment of land in this country. I cannot think of anything more disastrous.

Mr. Fairbairn: I am not sure that I understand the logic of this argument. The Treasury has differential taxation rates in different parts of the country for regional policies and so on. Therefore, it seems a little odd that the Minister should say that the Treasury's policy has always been against regional variations.

Mr. Davies: We are talking not about regional variations but about the ability, by affirmative resolution, to change the rate of tax between different areas. How

would bids for burgage property in Kinross and West Perthshire be resolved? The hon. and learned Gentleman would no doubt endeavour to bring pressure on the Treasury to get the rate down to 40 per cent. That is the kind of situation we should face if we gave the Executive, albeit by affirmative resolution, power to fix different rates of tax.
Subsection (2) refers to "the kind of development,". The hon. Member for Aylesbury honestly said that we could draw a distinction between industrial and commercial development. I should not disagree too much about drawing a distinction between industrial and commercial development, but I do not think that it can be done by affirmative resolution.
Yesterday hon. Gentlemen on the Front and Back Benches argued that our differential between industrial and commercial development discriminated against commercial property. That is a small difference. The hon. Member for Aylesbury is now saying that we can have 30 per cent. for commercial development in the City of London and 60 per cent. for industrial development in Manchester, or vice versa. That is the kind of situation that he wishes the House to accept.
The hon. Gentleman said that a change could be made only once a year. According to the new clause, it could be increased only once a year. However, there is nothing to prevent it being decreased more than once a year. Therefore, within a particular fiscal year the rate could be changed from 60 per cent. to 50 per cent., for example, on burgage property in Scotland.
That is the kind of constitutional monstrosity that the Opposition now have as their official policy. This is not a Back Bench proposal. Back Benchers are meant to be irresponsible, and they should be irresponsible. But hon. Gentlemen who are seeking office and the confidence of the country are now putting forward a constitutional monstrosity. The new clause, if accepted, would irretrievably damage the property market by creating uncertainty and difficulty for anybody who wished to plan the development of land in a sane and rational manner.
I could go on about the lack of virtue of the new clause. I have been accused of standing at this Dispatch Box trying


to defend the indefensible. Whatever I have had to defend has not been half as bad as what the hon. Member for Aylesbury tried to defend when he came into the debate at a late stage.
It is clear that the Opposition do not know where they stand on the taxing of betterment. Some hon. Gentlemen honestly and forthrightly said that they did not want this kind of betterment tax. I respect that view. But the Opposition Front Bench wants a betterment tax. Hon. Gentlemen do not know what rate they want or how they intend to operate the tax. I suggest that acceptance of the new clause would give massive power to the Executive to determine the taxation of individuals.

Mr. Raison: Before the hon. Gentleman sits down, will he try to justify the 80 per cent. rate? One feature of Second Reading and, indeed, of the Committee stage was that the Minister never seriously tried to justify the 80 per cent. The essence of our argument is that 80 per cent. is wrong. Will the hon. Gentleman tell us why he believes it to be right?

Mr. Davies: The hon. Gentleman must not seek to regain some of the initiative he has so disastrously lost by putting this new clause on the Notice Paper. We are debating his new clause and he asks me to justify 80 per cent. But he has to justify this monstrosity of a new clause that he has put down, which would cause a great deal of damage. This is not an academic debate. The new clause would cause more damage to property development than would anything under DLT. I ask the House to treat the new clause with the scorn and derision that it deserves.

7.0 p.m.

Mr. Hugh Rossi: As my hon. Friend the Member for North Fylde (Mr. Clegg) has mentioned, this tax is closely linked with the land scheme under the Community Land Act. Most of us who were concerned with that Act formed the impression that the tax that was to be introduced by this Bill was more an instrument of land policy than primarily a fiscal measure for the purpose of raising revenue. It is in the context of this tax as an instrument of land policy that we must regard it.
As I understand it, the object of this tax, in a sense, is twofold. First, there

is the intention to enable local authorities to buy land more cheaply than they otherwise would, because they will be buying, certainly up to the second appointed day, net of whatever the DLT will be. Secondly, there is the intention to tax what are considered to be unconscionable gains through betterment of land as a result of planning permission.
The Government have formed the view, with which we profoundly disagree, that the right level of tax necessary to attain this object is 80 per cent. upon the development value of the land in question. However, from the representations that we on the Opposition side of the House have received, and also from the representations that we know the Minister has received, 80 per cent. is far too high. It will cause a drying up of the availability of land for development purposes. The Government have themselves conceded this, because at the last minute, just before the introduction of this Bill, after speaking for many months of a rate of 80 per cent. rising to 100 per cent., the Paymaster General, in answer to a parliamentary Question that I tabled asking him what representations he had received on this topic, announced the lesser rate of 66⅔ per cent. for an initial period of three years on a first tranche of development value. The representations that the Government received were the same as those that we had received from the construction industry, and from house builders in particular.
The situation has changed. As my hon. Friend the Member for Aylesbury (Mr. Raison) said, we are still faced with the prospect that in about two years' time no land will be available for essential and necessary development. We are advised that at the moment there are between 18 months' and two years' stock of land in the hands of house builders, and no more; and they are not getting any more because, since the inception of this legislation, people have not been selling land for development purposes. They have not been applying for planning permissions either, because they realise that mere application for planning permission, certainly since the enactment of the Community Land Act, results in local authorities immediately having power to acquire that land for themselves. Therefore, once the existing stocks, which will last for between 18


months and two years, are used there will be virtually no land for development unless local authorities exercise the Draconian powers of compulsory purchase that the Community Land Act has given them.
That again depends, however, upon local authorities having, first, the manpower resources to go out and identify for themselves land suitable for development. It also needs resources in terms of money—public sector borrowing—to bring that land in for this purpose. We feel that this measure, with this tax pitched at the rate of 80 per cent., is absolutely disastrous for this country and for the needs and ambitions of our people for better homes. The Minister has sought to make great play of the fact that the Opposition have tried at various stages to propose to the Government different rates of tax that we know would be acceptable. On Second Reading I believe I suggested 52 per cent. in line with corporation tax for closed companies. We are advised that a tax at that rate would achieve the objectives of the hon. Gentleman in relation to the acquisition of land cheaply by local authorities, and would avoid unconscionable profits being made from windfall gains, and yet at the same time would leave sufficient incentive to land owners to bring their land forward for development voluntarily, instead of under compulsion.
We did not succeed in persuading the Government to accept that, and so another attempt was made in Committee. There the proposal for a rate of 60 per cent. was made, and again the same arguments were adduced. Again the Government closed their ears completely and rejected the proposal. Therefore, today we are left with this question: how can we bring forward a proposal that could possibly be accepted by the Government which will produce a situation in which scarcity of land for development purposes will not be created? The two levels of tax, in the area of 52 per cent. to 60 per cent., which we believe to be right in the present economic circumstances, are totally unacceptable to the Government. Obviously, we cannot repeat those proposals on the Floor of the House today. Indeed, it is questionable whether such a proposal would be selected for debate today.

Mr. Denzil Davies: Is the hon. Gentleman saying that he would like the Government now to accept what is in the new clause as a flexible rate of tax between 30 per cent. and 60 per cent., determined by affirmative resolution of the House, varying between different areas of the country and between industrial and commercial development, a tax that could be decreased more than once a year? Is he now asking the Government to accept that as official Opposition policy?

Mr. Rossi: We are putting it forward merely on the basis of faute de mieux and for no other reason whatsoever. We are doing it on the basis of giving the Government a certain amount of flexibility of opportunity without the need for further legislation once they discover—as they will discover, as surely as night follows day—that they are disastrously wrong about the level they have pitched the tax. At least we are giving them an opportunity.
Although the new clause does not endear itself to me, it is a last resort to stop damage being done, because it will enable the hon. Gentleman, when he learns his mistake, as he surely will, by a simple device to adjust tax in appropriate circumstances. It would enable him for example—and this is why is is posited in this flexible way—if he finds that no housing land is coming forward at all because of that rate, to come to the House with an order and to say "We have made a mistake. Rates of 80 per cent. and 66⅔ per cent. are driving land off the market. The level of house building is collapsing. Let us try now to put on a lower rate of, say, 52 per cent." The Minister could do that for housing, even on a regional basis if he finds that the problems exist in some areas more than others, if he finds it necessary to reduce the disincentive on the part of land owners to bring forward land for development purposes.
This is an instrument of flexibility that does not attract me terribly, but in the circumstances it is the best possible alternative to the Government's proposals. It is on that basis that I recommend it to my right hon. and hon. Friends to save the disaster that the present Government would otherwise bring about. It has the disadvtantage of creating a degree of uncertainty. However, if it is known in the construction industry that


the objective of the new clause is to bring in relief, either to a particular section of the construction or development industry or to a particular region of the country where that relief seems to be necessary because otherwise development will not take place, I am sure that on that basis it would be welcomed.
I hope, therefore, that the House will accept this proposition, although we would rather see at this stage an amendment, acceptable to the Government, which would put the rate at, say, 52 per cent. to 60 per cent., and no higher, because we feel that that is right.
As regards our views on this tax generally, we accept that there should be a tax upon windfall gains made out of the grant of planning permission, but it should be levied at a rate which leaves, as I have suggested, the incentive to the owner voluntarily to allow his land to come forward for development purposes, and not a rate that acts as a disincentive.
We should also like to see—we are going over old ground by mentioning it, although the Minister has asked us to spell it out again—the tax utilised for the benefit of the local authorities so that they can set it off against the infrastructure

ture costs which they invariably incur when they grant planning permission, certainly for sizeable developments. It is that element of infrastructure costs which acts as a disincentive again on the part of the local authorities giving planning permissions readily, because they are fearful of the impact upon their rate base of the infrastructure costs if they give too many planning permissions too readily and too easily. Therefore, that objection must be made. That is where we should like to see a fair tax diverted.

I should have thought that the Opposition's view on these matters had been spelled out sufficiently in debates, on Second Reading of this Bill and throughout the proceedings on the Community Land Act, without the Minister seeking to make rather silly debating points in answer to this matter, when he knows that what he is doing, and what we are making him do, is defending this appalling rate of 80 per cent. It is on the basis of voting against that rate that I ask my right hon. and hon. Friends to support the new clause.

Question put, That the clause be read a Second time:—

The House divided: Ayes 264, Noes 292.

Division No. 193.]
AYES
[7.16 p.m.


Adley, Robert
Channon, Paul
Fookes, Miss Janet


Aitken, Jonathan
Churchill, W. S.
Forman, Nigel


Alison, Michael
Clark, Alan (Plymouth, Sutton)
Fox, Marcus


Amery, Rt Hon Julian
Clark, William (Croydon S)
Fraser, Rt Hon H. (Stafford &amp; St)


Arnold, Tom
Clarke, Kenneth (Rushcliffe)
Fry, Peter


Atkins, Rt Hon H. (Spelthorne)
Clegg, Walter
Galbraith, Hon. T. G. D.


Awdry, Daniel
Cockcroft, John
Gardiner, George (Reigate)


Bain, Mrs Margaret
Cooke, Robert (Bristol W)
Gardner, Edward (S Fylde)


Baker, Kenneth
Cope, John
Gilmour, Rt Hon Ian (Chesham)


Banks, Robert
Cordle, John H.
Gilmour, Sir John (East Fife)


Bell, Ronald
Cormack, Patrick
Glyn, Dr Alan


Bennett, Dr Reginald (Fareham)
Corrie, John
Goodhart, Philip


Benyon, W.
Crawford, Douglas
Goodhew, Victor


Berry, Hon Anthony
Critchley, Julian
Goodlad, Alastair


Biffen, John
Crouch, David
Gorst, John


Biggs-Davison, John
Crowder, F. P.
Gow, Ian (Eastbourne)


Blaker, Peter
Davies, Rt Hon J. (Knutsford)
Gower, Sir Raymond (Barry)


Body, Richard
Dean, Paul (N Somerset)
Grant, Anthony (Harrow C)


Boscawen, Hon Robert
Dodsworth, Geoffrey
Gray, Hamish


Bottomley, Peter
Douglas-Hamilton, Lord James
Griffiths, Eldon


Bowden, A. (Brighton, Kemptown)
Drayson, Burnaby
Grist, Ian


Boyson, Dr Rhodes (Brent)
du Cann, Rt Hon Edward
Grylls, Michael


Bradford, Rev Robert
Dunlop, John
Hall, Sir John


Braine, Sir Bernard
Durant, Tony
Hall-Davis, A. G. F.


Brittan, Leon
Dykes, Hugh
Hamilton, Michael (Salisbury)


Brocklebank-Fowler, C.
Edwards, Nicholas (Pembroke)
Hampson, Dr Keith


Brotherton, Michael
Elliott, Sir William
Hannam, John


Bryan, Sir Paul
Emery, Peter
Harvie Anderson, Rt Hon Miss


Buchanan-Smith, Alick
Evans, Gwynfor (Carmarthen)
Hastings, Stephen


Buck, Antony
Ewing, Mrs Winifred (Moray)
Havers, Sir Michael


Bulmer, Esmond
Eyre, Reginald
Hawkins, Paul


Burden, F. A.
Fairbairn, Nicholas
Hayhoe, Barney


Butler, Adam (Bosworth)
Fairgrieve, Russell
Heseltine, Michael


Carlisle, Mark
Farr, John
Hicks, Robert


Carson, John
Fisher, Sir Nigel
Higgins, Terence L.


Chalker, Mrs Lynda
Fletcher-Cooke, Charles
Holland, Philip




Hordern, Peter
Miller, Hal (Bromsgrove)
St. John-Stevas, Norman


Howe, Rt Hon Sir Geoffrey
Mills, Peter
Scott, Nicholas


Howell, David (Guildford)
Miscampbell, Norman
Scott-Hopkins, James


Howell, Ralph (North Norfolk)
Mitchell, David (Basingstoke)
Shaw, Giles (Pudsey)


Hunt, David (Wirral)
Moate, Roger
Shelton, William (Streatham)


Hunt, John
Molyneaux, James
Shepherd, Colin


Hurd, Douglas
Monro, Hector
Shersby, Michael


Hutchison, Michael Clark
Moore, John (Croydon C)
Sims, Roger


Irving, Charles (Cheltenham)
More, Jasper (Ludlow)
Sinclair, Sir George


James, David
Morgan, Geraint
Skeet, T. H. H.


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Morgan-Giles, Rear-Admiral
Smith, Dudley (Warwick)


Johnson Smith, G. (E Grinstead)
Morris, Michael (Northampton S)
Spence, John


Jones, Arthur (Daventry)
Morrison, Charles (Devizes)
Spicer, Michael (S Worcester)


Jopling, Michael
Morrison, Hon Peter (Chester)
Sproat, Iain


Joseph, Rt Hon Sir Keith
Mudd, David
Stainton, Keith


Kaberry, Sir Donald
Neave, Airey
Stanley, John


Kellett-Bowman, Mrs Elaine
Nelson, Anthony
Steen, Anthony (Wavertree)


Kershaw, Anthony
Neubert, Michael
Stewart, Ian (Hitchin)


Kilfedder, James
Newton, Tony
Stokes, John


Kimball, Marcus
Normanton, Tom
Stradling Thomas, J.


King, Evelyn (South Dorset)
Nott, John
Tapsell, Peter


King, Tom (Bridgwater)
Onslow, Cranley
Taylor, R. (Croydon NW)


Kitson, Sir Timothy
Oppenheim, Mrs Sally
Taylor, Teddy (Cathcart)


Knight, Mrs Jill
Page, John (Harrow West)
Tebbit, Norman


Knox, David
Page, Rt Hon R. Graham (Crosby)
Temple-Morris, Peter


Lamont, Norman
Parkinson, Cecil
Thatcher, Rt Hon Margaret


Lane, David
Pattie, Geoffrey
Thomas, Rt Hon P. (Hendon S)


Langford-Holt, Sir John
Percival, Ian
Thompson, George


Lawrence, Ivan
Peyton, Rt Hon John
Townsend, Cyril D.


Lawson, Nigel
Pink, R. Bonner
Trotter, Neville


Lester, Jim (Beeston)
Powell, Rt Hon J. Enoch
Tugendhat, Christopher


Lewis, Kenneth (Rutland)
Price, David (Eastleigh)
van Straubenzee, W. R.


Lloyd, Ian
Prior, Rt Hon James
Vaughan, Dr Gerard


Loveridge, John
Pym, Rt Hon Francis
Viggers, Peter


Luce, Richard
Raison, Timothy
Wakeham, John


McAdden, Sir Stephen
Rathbone, Tim
Walder, David (Clitheroe)


MacCormick, Iain
Rawlinson, Rt Hon Sir Peter
Walker, Rt Hon P. (Worcester)


McCrindle, Robert
Rees, Peter (Dover &amp; Deal)
Wall, Patrick


McCusker, H.
Rees-Davies, W. R.
Walters, Dennis


Macfarlane, Neil
Reid, George
Watt, Hamish


MacGregor, John
Renton, Tim (Mid-Sussex)
Weatherill, Bernard


Macmillan, Rt Hon M. (Farnham)
Ridley, Hon Nicholas
Wells, John


McNair-Wilson, M. (Newbury)
Ridsdale, Julian
Whitelaw, Rt Hon William


Madel, David
Rifkind, Malcolm
Wiggin, Jerry


Marshall, Michael (Arundel)
Rippon, Rt. Hon Geoffrey
Wigley, Dafydd


Marten, Neil
Roberts, Michael (Cardiff NW)
Winterton, Nicholas


Mates, Michael
Roberts, Wyn (Conway)
Wood, Rt Hon Richard


Mather, Carol
Rodgers, Sir John (Sevenoaks)
Young, Sir G. (Ealing, Acton)


Maude, Angus
Ross, William (Londonderry)
Younger, Hon George


Maudling, Rt Hon Reginald
Rossi, Hugh (Hornsey)



Maxwell-Hyslop, Robin
Rost, Peter (SE Derbyshire)
TELLERS FOR THE AYES:


Mayhew, Patrick
Royle, Sir Anthony
Mr. Spencer Le Marchant and


Meyer, Sir Anthony
Sainsbury, Tim
Mr. Fred Silvester.




NOES


Abse, Leo
Brown, Ronald (Hackney S)
Davies, Denzil (Llanelli)


Allaun, Frank
Buchan, Norman
Davies, Ifor (Gower)


Anderson, Donald
Buchanan, Richard
Davis, Clinton (Hackney C)


Archer, Peter
Butler, Mrs Joyce (Wood Green)
Deakins, Eric


Armstrong, Ernest
Callaghan, Jim (Middleton &amp; P)
Dean, Joseph (Leeds West)


Ashley, Jack
Campbell, Ian
de Freitas, Rt Hon Sir Geoffrey


Ashton, Joe
Canavan, Dennis
Dell, Rt Hon Edmund


Atkins, Ronald (Preston N)
Cant, R. B.
Dempsey, James


Atkinson, Norman
Carmichael, Neil
Doig, Peter


Bagier, Gordon A. T.
Carter, Ray
Dormand, J. D.


Barnett, Guy (Greenwich)
Carter-Jones, Lewis
Douglas-Mann, Bruce


Barnett, Rt Hon Joel (Heywood)
Cartwright, John
Dunn, James A.


Bates, Alf
Clemitson, Ivor
Dunned, Jack


Bean, R. E.
Cocks, Michael (Bristol S)
Dunwoody, Mrs Gwyneth


Beith, A. J.
Cohen, Stanley
Eadie, Alex


Benn, Rt Hon Anthony Wedgwood
Coleman, Donald
Edge, Geoff


Bennett, Andrew (Stockport N)
Colquhoun, Ms Maureen
Edwards, Robert (Wolv SE)


Bidwell, Sydney
Cook, Robin F. (Edin C)
Ellis, John (Brigg &amp; Scun)


Bishop, E. S.
Corbett, Robin
Ellis, Tom (Wrexham)


Blenkinsop, Arthur
Cox, Thomas (Tooting)
English, Michael


Boardman, H.
Craigen, J. M. (Maryhill)
Ennals, David


Booth, Rt Hon Albert
Cronin, John
Evans, Fred (Caerphilly)


Bottomley, Rt Hon Arthur
Cryer, Bob
Evans, Ioan (Aberdare)


Boyden, James (Bish Auck)
Cunningham, G. (Islington S)
Ewing, Harry (Stirling)


Bradley, Tom
Cunningham, Dr J. (Whiteh)
Faulds, Andrew


Bray, Dr Jeremy
Dalyell, Tam
Fernyhough, Rt Hon E.


Brown, Hugh D (Provan)
Davidson, Arthur
Flannery, Martin


Brown, Robert C. (Newcastle W)
Davies, Bryan (Enfield N)
Fletcher, Raymond (Ilkeston)







Fletcher, Ted (Darlington)
Lomas, Kenneth
Rodgers, William (Stockton)


Foot, Rt Hon Michael
Loyden, Eddie
Rooker, J. W.


Ford, Ben
Luard, Evan
Ross, Stephen (Isle of Wight)


Forrester, John
Lyons, Edward (Bradford W)
Ross, Rt. Hon W. (Kilmarnock)


Fowler, Gerald (The Wrekin)
Mabon, Dr J. Dickson
Rowlands, Ted


Fraser, John (Lambeth, N'w'd)
McCartney, Hugh
Sandelson, Neville


Freeson, Reginald
McElhone, Frank
Sedgemore, Brian


Freud, Clement
MacFarquhar, Roderick
Selby, Harry


Garrett, John (Norwich S)
McGuire, Michael (Ince)
Shaw, Arnold (Ilford South)


Garrett, W. E. (Wallsend)
Mackenzie, Gregor
Sheldon, Robert (Ashton-u-Lyne)


George, Bruce
Mackintosh, John P.
Shore, Rt Hon Peter


Gilbert, Dr John
Maclennan, Robert
Short, Rt Hon E. (Newcastle C)


Ginsburg, David
McMillan, Tom (Glasgow C)
Short, Mrs Renée (Wolv NE)


Golding, John
McNamara, Kevin
Silkin, Rt Hon John (Deptford)


Gould, Bryan
Madden, Max
Silkin, Rt Hon S. C. (Dulwich)


Gourlay, Harry
Magee, Bryan
Sillars, James


Graham, Ted
Mahon, Simon
Silverman, Julius


Grant, George (Morpeth)
Mallalleu, J. P. W.
Skinner, Dennis


Grant, John (Islington C)
Marks, Kenneth
Small, William


Grocott, Bruce
Marquand, David
Smith, John (N Lanarkshire)


Hamilton, James (Bothwell)
Marshall, Dr Edmund (Goole)
Spearing, Nigel


Hardy, Peter
Marshall, Jim (Leicester S)
Stallard, A. W.


Harper, Joseph
Maynard, Miss Joan
Stewart, Rt Hon M. (Fulham)


Harrison, Walter (Wakefield)
Meacher, Michael
Stoddart, David


Hart, Rt Hon Judith
Mellish, Rt Hon Robert
Strang, Gavin


Hatton, Frank
Mendelson, John
Strauss, Rt Hon G. R.


Hayman, Mrs Helene
Mikardo, Ian
Summerskill, Hon Dr Shirley


Heffer, Eric S.
Millan, Bruce
Swain, Thomas


Hooley, Frank
Miller, Mrs Millie (Ilford N)
Taylor, Mrs Ann (Bolton W)


Hooson, Emlyn
Mitchell, R. C. (Soton, Itchen)
Thomas, Jeffrey (Abertillery)


Horam, John
Molloy, William
Thomas, Mike (Newcastle E)


Howell, Rt Hon Denis
Moonman, Eric
Thomas, Ron (Bristol NW)


Howells, Geraint (Cardigan)
Morris, Alfred (Wythenshawe)
Thorne, Stan (Preston South)


Hoyle, Doug (Nelson)
Morris, Charles R. (Openshaw)
Tierney, Sydney


Huckfield, Les

Tomlinson, John



Morris, Rt Hon J.(Aberavon)
Tomney, Frank


Hughes, Rt Hon C. (Anglesey)
Moyle, Roland
Torney, Tom


Hughes, Mark (Durham)
Mulley, Rt Hon Frederick
Tuck, Raphael


Hughes, Robert (Aberdeen N)
Murray, Rt Hon Ronald King
Urwin, T. W.


Hughes, Roy (Newport)
Newens, Stanley 
Varley, Rt Hon Eric G.


Hunter, Adam
Noble, Mike
Wainwright, Edwin (Dearne V)


Irvine, Rt Hon Sir A. (Edge Hill)
Oakes, Gordon
 Walden, Brian (B'ham, L'dyw'd)


Irving, Rt Hon S. (Dartford)
Ogden, Eric
Walker, Harold (Doncaster)


Jackson, Colin (Brighouse)
O'Halloran, Michael
Walker, Terry (Kingswood)


Jackson, Miss Margaret (Lincoln)
Orbach, Maurice
Ward, Michael


Janner, Greville
Orme, Rt Hon Stanley
Watkins, David


Jay, Rt Hon Douglas
Ovenden, John
Watkinson, John


Jeger, Mrs Lena
Owen, Dr David
Weetch, Ken


Jenkins, Hugh (Putney)





Park, George
Wellbeloved, James


John, Brynmor
Palmer, Arthur
Weitzman, David


Johnson, James (Hull West)
Parker, John
Wellbeloved, James


Johnson, Walter (Derby S)
Parry, Robert
White, Frank R. (Bury)


Johnston, Russell (Inverness)
Pavitt, Laurie
White, James (Pollok)


Jones, Barry (East Flint)
Peart, Rt Hon Fred
Whitehead, Phillip


Jones, Dan (Burnley)

Whitlock, William


Judd, Frank
Pendry, Tom
Willey, Rt Hon Frederick


Kaufman, Gerald
Penhaligon, David
Williams, Alan (Swansea W)


Kelley, Richard
Perry, Ernest
Williams, Alan Lee (Hornch'ch)


Kerr, Russell
Phipps, Dr Colin
Williams, Rt Hon Shirley (Hertford)


Kilroy-Silk, Robert
Prentice, Rt Hon Reg
Williams, Sir Thomas


Kinnock, Neil
Prescott, John
Wilson, Alexander (Hamilton)


Lambie, David
Price, C. (Lewisham W)
Wilson, Rt Hon H. (Huyton)


Lamborn, Harry
Price, William (Rugby)
Wilson, William (Coventry SE)


Lamond, James
Radice, Giles
Wise, Mrs Audrey


Latham, Arthur (Paddington)
Rees, Rt Hon Merlyn (Leeds S)
Woodall, Alec


Leadbitter, Ted
Richardson, Miss Jo
Woof, Robert


Lee, John
Roberts, Albert (Normanton)
Wrigglesworth, Ian


Lestor, Miss Joan (Eton &amp; Slough)
Roberts, Gwilym (Cannock)
Young, David (Bolton E)


Lever, Rt Hon Harold
Robertson, John (Paisley)



Lewis, Ron (Carlisle)
Robinson, Geoffrey
TELLERS FOR THE NOES:


Lipton, Marcus
Roderick, Caerwyn
Mr. Peter Snape and


Litterick, Tom
Rodgers, George (Chorley)
Mr. James Tinn.

Question accordingly negatived.

New Clause 11

REPLACEMENT OF BUSINESS ASSETS

(1) If the consideration which a person carrying on a trade obtains for the disposal of, or of his interest in, assets (in this section referred to as "the old assets") used, and

used only, for the purposes of the trade throughout the period of ownership is wholly or partly applied by him in acquiring other assets, or an interest in other assets (in this paragraph referred to as "the new assets") which on acquisition are taken into use, and used only, for the purposes of the trade, and—

(a) the old assets and the new assets are within the classes of assets listed in subsection (6) of section 33 of the Finance Act 1965 (replacement of business assets) and the


old assets consist of or include land in the United Kingdom;
(b) realised development value accrues to the person carrying on the trade in respect of the disposal; and
(c) the amount of consideration for the disposal applied as aforesaid is greater than the difference between the whole of that consideration and the amount of the realised development value, then, if the person carrying on the trade makes a claim as respects that realised development value, the provision of subsection (2) to (5) below shall apply.

(2) There shall be ascertained the following amounts; that is to say:—

(a) the amount by which so much of the consideration for the disposal as has been applied as described in subsection (1) above exceeds the difference mentioned in paragraph (c) of subsection (1) above; and
(b) the amount of the consideration for the disposal which has been so applied in acquiring qualifying assets; and in the following provisions of this paragraph "the material amount" means whichever of those amounts is the smaller (or, if they are equal, the amount which is equal to each of them).

(3) The realised development value to which the person carrying on the trade is chargeable for the financial year in which the disposal was made shall be reduced by whichever of the following amounts is the smaller, that is to say:—

(a) the material amount under subsection (2) above;
(b) the amount, if any, by which chargeable realised development value exceeds allowable losses for the purpose of development land tax for the financial year.

(4) Where a reduction falls to be made under the preceding sub-paragraph, the person carrying on the trade shall be treated for the purpose of Development Land Tax as if the relevant base value for the new assets or the interest in the new assets were reduced (or further reduced) by what is under subsection (3) above the smaller amount; but this subsection shall not affect the treatment of the other party to the transaction involving the old assets, or of the other party to the transaction involving the new assets.

(5) If on the disposal of the new assets by the person carrying on the trade, no realised development value accrues, and the reduction in paragraph (b) of subsection (3) above does not fall to be made, a corresponding reduction shall be made so that for the purposes of capital gains tax, the amount or value of the consideration for the acquisition of, or of the interest in the new assets be reduced by the amount by which the relevant base value for development land tax purposes would have been reduced.—[Mr. Ian Stewart.]

Brought up, and read the First time.

7.30 p.m.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.
In Committee we tabled a clause in much the same terms to provide for deferment of development land tax on the replacement of business assets. We did not reach it because, to meet the timetable to which the Government wished to adhere for the Committee stage, we could not have a full debate on all the outstanding matters. This is the first time the subject has been raised. I hope, therefore, that the House will bear with me if I explain some of the technicalities involved in this difficult area.
The purpose is to ensure that a principle which has already been established for capital gains tax and development gains tax should be extended to the development land tax. Under the capital gains tax provisions, roll-over—the preservation of relief from taxation—applies when assets in a limited group of categories are disposed of and would otherwise give rise to a charge to capital taxation. Because the proceeds are in whole or in part reinvested in a similar group of assets, the liability to tax is deferred until an event which subsequently gives rise to the maturity of that taxation.
In this case—naturally enough, as it is a development land tax—we start with the asset consisting of land, but the clause is drafted in a way which provides for roll-over relief even if the proceeds from the sale of land or the realisation of development value are reinvested in the same groups of other assets as applied for capital gains tax. These are not only buildings and land but plant and machinery, ships and aircraft, commercial goodwill and so on. This may at first sight appear illogical, but it must be remembered that, over quite a large spectrum of transactions relating to property, development land tax will replace capital gains tax and, therefore, the base on which capital gains tax is calculated is narrowed. The part of the base which is removed will now be subject to development land tax instead. Therefore, in order to preserve the situation, it necessary to allow development land tax to have relief on replacement of assets in the same categories as capital gains tax.
The technical provisions of the clause are complicated, as they unfortunately must be. At so many points in the Bill


we have found that relatively simple concepts which could be expressed in the helpful explanatory notes published by the Inland Revenue have become, when converted into the terminology of the Bill very long and complex in their formulation. In drafting our new clauses we have had an insight into what the Government faced in trying to produce a compact Bill. That is not to say that we do not think that in many parts it might have been drawn up more concisely, but it is difficult to deal with these technical problems in a simple, shorthand way.
I believe that it will be helpful if I summarise, albeit in slightly technical language, the provisions of the clause. It would grant roll-over relief in the following way. First, it applies only to persons carrying on a trade and not to people in any of the other categories who may have property which is subject to development land tax. Secondly, the original assets—in technical terms, the "old assets"—and the new assets which are acquired with the proceeds must fall within the classes I have mentioned. which are already specified for capital gains tax purposes.
Thirdly, the amount of disposal proceeds applied to purchase new assets must exceed that part of the consideration receivable in respect of current use value of the old assets. Otherwise, there would be no development value. Fourthly, the material amount—that is the technical term—on which relief is to be given is the lesser of two figures, the amount of sale proceeds applied to purchase the new assets or the excess of the proceeds applied to purchase the new assets over the part of the proceeds which reflects the current use value.
Fifthly, the chargeable realised development value is to be reduced by the material amount up to a maximum of the total net chargeable realised development value for the financial year.
Finally, this relief in turn reduces the base value of the new assets for development land tax purposes. That is the form in which the deferral of tax is achieved. If, however, no development land tax arises on the sale of the new assets, this relief reverts to be available for capital gains tax purposes on the sale of those assets.
I must apologise for the complexity of that explanation, but it is in line with, and I hope no more complex than, some of the comments which had to be made in Committee on the more technical aspects of the Bill. It has been something of a headache for us on this side of the House, and perhaps for the Minister, to deal with a Bill in which the intention of the clauses, even when one knows what they mean, is so hard to unravel or explain.
The clause does not seek exemption from the tax. It seeks only a deferment of a liability to the tax, as has already been done with the development gains tax, which the development land tax is designed to supersede.
There are two principal areas in which roll-over provisions are particularly needed. The first is agriculture. Farming is capital-intensive and is already suffering from a considerable shortage of working capital, partly because of the difficult years through which it has recently come but also because of the imposition of capital transfer tax and now the threat or prospect—depending on how one views it—of the wealth tax, which is waiting in the wings. Therefore, the voluntary sale of land by farmers is normally undertaken only when they have in mind reinvesting in land, buildings or equipment for the furthering of their agricultural activities.
But not all sales of land by farmers which might give rise to the tax are made voluntarily. Indeed, one of the most serious situations will arise where land falls to be acquired under a compulsory purchase order and the farmer has no option but to sell part of his farm. There is a current case in Hertfordshire, where there are proposals to extend the new town of Stevenage into north Hertfordshire between two farming villages, Graveley and Weston. Quite a lot of good-quality agricultural land owned by local farmers and under cultivation will be required for the expansion of the new town.
The farmers in those areas will have to farm their remaining land more intensively by improving their capital equipment or trying to increase their acreage again, so that they maintain their total farming area. Either way, they will be required to invest in the assets covered by the proposals in the clause. The


difficulty is that if they are to buy further acres of agricultural land they will not be able to acquire them at current use value and they will have to pay over the odds for them. The land is in an attractive rural area fairly close to London. There are long-term development possibilities in some of the villages which give a potential increase above the farming value of the land.
When farmers have to sell land to accommodate something which is imposed upon them from outside, such as the expansion of a new town, they will be able to maintain the scale of their farming activities only if they reinvest either by farming their existing smaller area more thoroughly or profitably or by acquiring new land, which itself may be available only at inflated prices. The purpose of the new clause is to give them the opportunity of deferring tax on the sale of the land for a purpose of which they do not approve so as to enable them to continue farming on the same scale.
This provision applies to agriculture, but perhaps its most important application is to industrial companies. Under the Government's New Clause 1, which was accepted yesterday as a replacement for Clause 19, if a company builds a factory for its own use—this is the industrial purposes argument which we discussed at some length yesterday—any realised development value that would have fallen to be taxed on the deemed disposal that took place at the commencement of the material development of the factory will be deferred until the factory is sold. The purpose of my new clause is to provide that the money that is realised from the sale—if it is sold—that triggers off the disposal for development land tax purposes, if reinvested in the class of assets I have described, would allow a further deferral of the tax so that the cash flow of the company concerned will not have to bear at that point a substantial extra tax demand.
There are a number of ways in which that could come about, and I shall give one brief illustration. If a company has expanded and it finds that its factory is too small, it may need to sell the premises and move to a larger factory. It seems entirely wrong that at that point, when the company is successful and expanding and, no doubt, needs all the working

capital it can get, it should fall to pay development land tax, whereas a company that was less progressive and expanded less rapidly could still fit into its old factory and would not have to pay the tax while it remained there. The same could apply to other forms of activity.
The person with an outdated factory in a residential area of a small town could stay there and redevelop it without paying development land tax as long as it was put to the same use and remained within the tolerance of 10 per cent. in area. However, if the owner wished to move to a different factory on the outskirts of the town, which might accord much better with new concepts of town planning or demographic changes, without New Clause 11 he would fall to be taxed at the very moment when he had all the other expenses of the removal of the factory.
In my constituency the first new town in the world was built—namely, Letchworth Garden City. It was designed by Ebenezer Howard at the turn of the century. Three-quarters of a century ago, ideas about the size and shape of Letchworth were rather different from those of today. The needs of industry 75 years ago were rather different from its needs today. That is not surprising if new industrial areas are to grow up that are not so close to the centres of towns such as Letchworth, and if at the same time there is a move to use land in the centre, or nearer to the centre, of such towns for further residential development or other purposes. On the sale of a factory in the middle of Letchworth and removal to one of the outskirts, any deferred tax under the provisions of Clause 19 would be triggered unless we had a roll-over provision.
7.45 p.m.
Equally, if a company has been operating from a freehold factory but needs to move to a new area in which factories are available to rent but not to buy, and if it wishes to take advantage of the funds available from the disposal of its old factory to buy plant with which to equip the new premises, we feel that the roll-over provision would be helpful.
We believe that it is essential to enable industry to continue to operate in suitable premises. It should not feel


constrained by the need to stay in the same place for fear of triggering off a substantial development land tax liability. That is why we believe that a roll-over provision on the lines suggested is required.
What do the Government say? They say "All right. Stay where you are. We shall clobber you if you have to move." That is not in harmony with any of the Government's industrial objectives or with the needs of industry. The Government may say that, when the second appointed day comes along under the community land scheme, such provisions will only complicate the tax and that they should be avoided at this stage. However, on anyone's reckoning that day is a long way off. In the meantime, we have to prepare ourselves to live with this tax as it will operate.
The Government should not seek to exclude a roll-over provision. Without one, we could starve the expanding and changing companies of working capital. By their very definition, it is those companies which have grown larger and more successful. The companies that have responded to the changing needs of our modern industrial society will be caught whereas the less active, less adventurous or more moribund companies which stay where they are will not be caught in the same way.
A roll-over provision was provided by the Government in the formula for the development gains tax in 1974. We are seeking to perpetuate a principle which already exists for capital gains tax and which was considered to be welcome and sensible by representatives of all political parties at that time. It seems that the only reason for such a provision not being brought into the Bill is, as we always find, that it fell under the shadow of the community land scheme. That, however, makes nonsense of the reality of industrial and agricultural needs.
I hope that the new clause will commend itself to the House.

Mr. Nicholas Ridley: I begin by apologising to the House for having missed the last few debates, which is more than the Minister of State has done. I think it is due to the hon. Gentleman for me to say how marvellously he has stood out the

debates alone, while palely loitering on the Government Front Bench. It is disgraceful that his senior colleagues should have left him alone to grapple with these difficult matters. As far as I can make out, he has had neither food nor drink, nor sleep.

Mr. Denzil Davies: I have had water.

Mr. Ridley: But nothing stronger. I am glad that at least the hon. Gentleman has had that. Surely the Minister for Housing and Construction, who is the eminence grise behind this measure, his boss the Chancellor of the Exchequer, or several other of the hon. Gentleman's senior colleagues, might have turned up to give him a bit of support. They might have taken one or two of the debates from time to time. I congratulate the hon. Gentleman on his perseverance, and sympathise with him for the lack of support—

Mr. Deputy Speaker (Sir Myer Galpern): Order. The hon. Gentleman will address himself to New Clause 11. I shall provide the Minister of State with a sandwich in between times, but let the hon. Gentleman address himself to the new clause.

Mr. Ridley: I am glad, Mr. Deputy Speaker, that you allowed me to pay tribute to the Minister of State before bringing me to order, quite rightly, on the new clause. I think that my hon. Friend the Member for Hitchin (Mr. Stewart) has done a great service in bringing it forward. It raises some very important points. I am sad that it applies only to industry and agriculture, and not to private individuals, as I shall demonstrate.
I listened to the Minister yesterday telling us that industry was so desperately broke that this levy must not apply to it where it was simply developing its own land and could not afford to pay the tax. I cannot see how he will be able to justify resisting the clause, because industry will be just as broke in relation to roll-over as in the case of deferment at the time of material development.
The Minister of State's argument yesterday will be very useful to us this time in pressing the need for industry to be able to defer tax still further if it is forced to move, either through its own volition, because it has to, having grown


out of its premises, or through some compulsory purchase, some road-widening scheme, or whatever it may be. If industry is broke, it should not pay the tax at all. Indeed, that is the argument we had yesterday.
But that there is more to it than that. It is quite true, as my hon. Friend said, that there were roll-over provisions of this sort in the capital gains tax, and in some senses also in the capital transfer tax. More and more in our capital taxation legislation—and that is what this tax is—there is provision that if an asset has to be realised in order to buy another one, the payment of tax can be either excused or deferred. 'That is obviously right. If a man has to move from one farm to another, why should he pay tax when his luckier neighbour is excused tax because he does not have to move?
It seems to me that the principle underlying the new clause is that we should really tax disinvestment. It is not offensive to me if any individual has assets and uses them for the whole of his life. An individual may be worth millions. He may inherit millions and die worth millions, but throughout his life he may have lived frugally and employed those assets in business and trade of one sort or another. I cannot believe that it is this which causes the Government to want to put this sort of legislation on the statute book. The man who inherits property worth millions and then either sells it or blows it in riotous living is offensive.
The right principle in dealing with capital taxation should be, wherever possible, to tax disinvestment rather than sound investment. This is, of course, difficult to apply in relation to development land tax, because the realisation of a development gain is often not so much the realisation of a capital asset as the realisation of a gain—as the hon. Gentleman said—whose value has been enhanced by a decision of the community. But as far as we can, we should move in the direction of restricting swingeing capital taxation to those who want to sell and get out, leaving the capital in the hands of those who may want to sell, but only for the purposes of buying another asset.
I have always thought that the unfairest thing of all is that if a man thinks it is

right to change capital from one share to another, he should have to pay capital gains tax on the sale of the first, irrespective of the fact that he only wants to switch.
Switching is one of the essential ways in which capital finds its way to the proper areas to which it should go, and in the matter of land use the same argument applies. It may well be that the good farmer finds his farm so encompassed with developments that in order to carry on he feels it necessary to switch, yet he knows that if he does so he is liable for a development gain. The same is true of business assets. If a factory has grown out of of its factory buildings, it is monstrous that the fact that it has done so well should force it to pay an arbitrary amount of tax simply because it has to move.
These seem to me to be the worst sorts of results of a tax of this sort. I hope that the Minister of State—tired though he must be now, and weary of this Bill—will agree in principle that there is something in what I have said. Although I accept that it is not easy or practicable to apply across the whole field of capital taxation, I suggest that in this one small instance, where business assets are to be replaced either to the same extent or to a greater exetent—or, in the case of a lesser extent, to that extent—it would be fair to defer this tax.
I have only two gentle criticisms of the clause. The first is that it applies only to business assets and not to individuals property. The second is that it is for deferral of the tax.
It was mentioned yesterday, over and over again, that the position concerning these large and growing blocks of deferred tax in the accounts of companies is becoming ridiculous. Why can we not just waive the tax? There will be businesses and people who will in the future have far larger theoretical debts in deferred tax hanging over their heads than the value of their assets. That is a bad situation. It inhibits borrowing and it inhibits the proper use of the assets, but beyond that it is demoralising. It simply means that the Government have invented taxes that are infinitely too high for the population to bear in certain cases, and have had to resort to the device not of reducing or cancelling taxes but simply of deferring them in order to save face.
The Bill is full of possibilities for deferral of tax. If tax can be deferred for either the reason in the clause or the reason in New Clause 1, which we discussed yesterday, it had better be waived altogether, because it means that it is too high and that it cannot be paid. Indeed, that was the argument of the Minister of State yesterday. He said "Industry cannot pay the tax, therefore we shall not make it pay. We shall defer it." But this leaves these large blocks of taxation against the company. It would be infinitely better if, instead of "deferred", we used the word "waived".
I strongly support my hon. Friend and congratulate him on his initiative, but in a way I wish he had been bolder.

8 p.m.

Mr. Denzil Davies: The clause, as the hon. Member for Hitchin (Mr. Stewart) said in moving it, is concerned to try to provide some kind of roll-over relief in respect of the disposal of land and the reinvestment of the proceeds by the vendor in land or in plant and machinery, so that he will not have to pay immediately the development land tax on that particular sale.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) argued an interesting case—that we should not concern ourselves with deferral and that we should instead say immediately "You shall not pay any tax at all, rather than have this tax hanging over your head." There is something to be said for avoiding deferral as much as possible. I take the point concerning stock relief, which was debated in the Committee stage of the Finance Bill.
There is a danger that these deferrals will cause problems in company accounts, but here we are concerned with a situation in which a person sells his land and makes a betterment profit. We are concerned with that situation and not with a situation where he makes a capital gain in the conventional sense. He can roll over that capital gain anyway under existing legislation. Therefore, a farmer who may be forced to sell his land because development encroaches closely on his sphere of operations, because a motorway is coming along or because he gets planning permission for houses, and who makes a betterment profit, will pay the tax. But he will still have

enough money left over to reinvest in farming land. If he wants to carry on his farming operation, presumably he will buy farming land which has no planning permission.
The farmer, by having a capital gains tax roll-over on a current use value basis, still has sufficient funds left to buy a comparable piece of land which does not have a betterment value. If he wants to buy land with a betterment value, as a result of having 80 per cent. of that betterment profit taken from him he may not have enough left to buy other land with betterment value. But I thought that the object of the exercise was for him to get back into farming and to buy farming land which did not have planning permission. If he is concerned with farming, he gets his roll-over relief in relation to any capital gain on current use value, which should leave him enough to invest in land for farming.

Mr. Graham Page: Is it not something of a gamble whether he will find land which has not at least some hope value? It is wishful thinking that he can go anywhere and buy land at current use value for farming.

Mr. Davies: Some land may have very little hope value. I remember the case of a gentleman who sold his farm on the edge of a town, moved to the next town, bought land on the edge of it and thereby made quite a lot of money over a period of five or 10 years. He was buying land with the hope of development for the purpose of making a betterment profit.

Mr. Graham Page: He would be caught under Section 884.

Mr. Davies: If a farmer wants to reinvest in land which does not have a value in excess of current use value, he still has the capital gains tax roll-over provisions to protect him in reinvesting at current use value.
The proposal of the Opposition is to incorporate the 1965 capital gains tax provisions into this legislation. Right hon. and hon. Gentlemen opposite are concerned with assets other than land, so that there could be a roll-over in the case of betterment profit into physical assets as well as into land. That is one reason why I cannot accept the new clause. We are dealing with a different


situation and a different tax which is concerned with the disposal of land, and not land and other assets as in the case of capital gains tax.
There is the further difficulty that, whereas the 1974 legislation on development gains tax contained some provisions for roll-over, they did not provide for roll-over into bare land. I am sure that the hon. Member for Cirencester and Tewkesbury will accept that if a roll-over relief from tax is introduced it often creates an inflationary situation. There are cases in West Wales where farmers who received large sums of money for the betterment value of their land bid in the market for other land which had only current use value, and, there being more money about, prices went up. Therefore, there are dangers in giving roll-over relief at a high rate of 80 per cent. on land, because it pushes up the price of agricultural land. The 1974 legislation provided a 30 per cent. roll-over relief and did not include bare land.

Mr. Ridley: I do not accept that that is undesirable. It seems proper and right that in those circumstances the price of land should rise. If there is no roll-over relief and the price of land remains stable, many good farmers will not get land and many less good farmers will cling on to land of which they should be dispossessed.

Mr. Davies: The hon. Gentleman said that a good farmer would not be able to acquire land. However, this is not the case of a good or a bad farmer: it is the case of a farmer who receives a sum of money in excess of the current use value of agricultural land and who is then able to bid up and pay more for good agricultural land, as opposed to another farmer who has not been so fortunate that planning permission has been given in respect of his farm. It is the man with the money, because of a fortuitous gain, being able to bid up the market. This has happened. This is one of the reservations about roll-over relief. At 30 per cent. it is not so bad, but at 80 per cent. the problem becomes greater.

Mr. Nicholas Winterton: Some of the betterment gain

could improve the agricultural land that the farmer intends to buy after being dispossessed of his existing farm for one reason or another. It would help to improve the land, buildings and farming methods and thereby increase agricultural production, which I thought was part of the Government's policy as outlined in their White Paper "Food from Our Own Resources".

Mr. Davies: I accept that some of it could be so used, but much of it might be put into investment in other assets. Some might be used for agriculture. However, that does not detract from my argument that this pushes up the price of agricultural land. If the hon. Gentleman talks to farmers in his area, he will discover that this is the complaint made frequently in respect of large sums realised from the sale of farms which have had planning permission. The 30 per cent. roll-over provisions of capital gains tax have created this problem.
Another reason why I cannot accept the new clause is that, quite frankly, it does not fit into our net of tax arrangements. I do not know the views of the Opposition with regard to the betterment tax. I gather that they are in favour of helping local authorities in some way whether by net-of-tax arrangements or otherwise. But presumably, even under their arrangements, we should have some kind of accounting. We should not know at any given time when the deferred tax would be paid to the local authority. We should therefore have very complicated arrangements, and roll-over relief does not fit in with the net-of-tax concept. We have tried to meet that point by having a £10,000 exemption on the betterment profit and by having a rate of 66 per cent. on the first £150,000. This compensates for the fact that we cannot introduce this kind of roll-over relief.
There are other reasons as well. There are economic reasons why we should not roll over a high rate of tax based on an 80 per cent. rate into other land, especially agricultural land. In most cases farmers would not be prejudiced, because they would be reinvesting in land with current use value.
I am sure that the Opposition will be happy with this explanation. This tax is different from other taxes because the arrangements for it are different, and


local authorities are involved with net-of-tax purchases.
For all those reasons, I cannot recommend the House to accept the new clause.

Question put and negatived.

New Clause 12

ALLOWANCES FOR LOSSES

(1) Where—

(a) the cost of acquisition of an interest in land was not less than the consideration for which that interest might reasonably have been expected to sell in the open market, and
(b) the disposal of the interest in land is either a deemed disposal or a disposal the consideration for which is not less than it might reasonably have been expected to be on a sale in the open market, and
(c) the realised development value calculated in accordance with section 5 above is negative (in this section called "negative realised development value")

then the amount of the negative realised development value shall, on a claim being made to the Board not later than six years from the end of the financial year in which the disposal occurs, be deducted from the realised development value accruing to the same owner on another disposal occurring in the same financial year and so far as that negative realised development value shall not be thereby exhausted it shall then be deducted from the realised development value aforesaid occurring in the previous financial year and if not then exhausted any subsequent financial year; and the Board shall repay any development land tax accordingly.

(2) Subsection (1) above shall not affect the amount of any deduction which is to be made under section 39 below.

(3) Section 12 above shall apply for determining the allowable amount of negative realised development value as it applies to determine the chargeable realised development value'.—[Mr. Ian Stewart.]

Brought up, and read the First time.

Mr. Ian Stewart: I beg to move, That the clause be read a Second time.
As in the case of the previous clause, we put down a new clause in Committee concerning allowances for loss, but it was not debated upstairs and, therefore, this matter now comes up for consideration for the first time.
The technical provisions of this new clause are that the land involved must be bought at arm's length market value or must be involved in deemed disposal at the beginning of material development.

If, in these circumstances, the realised development value is calculated under the provisions of the Bill and produces a minus figure, it should be offsettable against other development land tax liabilities.
I would have thought it was self-evident in a tax of this kind that there should be a provision for an offset of gains against losses. It may be that the only explanation of why such a provision was not incorporated in the Bill lies in what the Minister has just said. He emphasised that this was not the normal sort of tax, partly because of its rate and partly because local authorities have the ability to buy net of tax; and, therefore, the tax which is suffered by the chargeable person might go to the benefit of the local authority in one case and to the benefit of the Revenue in another. Surely there are practical difficulties in the interaction between gains and losses in these circumstances, but I hardly think that mechanical reasons are sufficient to justify excluding natural justice in a tax of this kind.
The higher the rates, the more important it is that there should be an offset of losses against gains. It does not seem to be a very valid argument that, because the rate of tax is so high, to defer it would have very substantial consequences, or, indeed, to say that because the rate of tax is so high it would be a bad thing for it to be offset against loss. We have not agreed that the tax should be at 80 per cent., far less at 100 per cent. Most people outside the Government particularly those who have to ensure that we make progress towards the second appointed day of the Community Land Act, would agree with us.
The real difficulty, if we do not have provision for losses, will be in practice with house-builders and those who have begun projects of development, such as factories, warehouses, offices and shops. In the past, the element of their profit which represented the development gain was only evident at the end of the day. At that point it is taxed—when it has already been achieved. It is not taxed at all if the same company has made a loss on other projects which have wiped out the gain in that particular case. But if the development gain is to be taxed on the basis of valuation assessed at the start of the project, surely all marginal cases


of development will be shelved. If there is not a clear profitable element in a particular project, it will not be undertaken.
Everyone knows that, with the changed circumstances in the property market and in different economic circumstances which arise from time to time, the value of the product of the building and development industries may be quite considerably different at the end of the day from what was expected when the development was undertaken. If taxation is charged only when a profit is realised at the end of the day, and there is an overall profit on all activities undertaken by the company in the meantime, the potential development gain serves as cash of value for the company undertaking the risk of the operation and also for the providers of finance as a margin of security of value against their borrowings of money which they will need to carry out the developments.
8.15 p.m.
If there is no offset for losses in this context, the practical effect will be that any case where the profitability at the end of the day is at all marginal or uncertain for any specific reason will be excluded altogether. Therefore, only the potentially profitable developments will go ahead. Obviously companies will do all they can to ameliorate this position, because if they have two parts of a development which are treated separately they will get no offset. But if they have two parts of a development which are treated as the same material development and the whole is treated as one assembly of land in the language of the Bill, only the overall profit at the end of the day, if that is when the tax is due to fall, will be charged.
The problem is not so much one of dealing with land which can or cannot be regarded as part of the same project, but it is one where builders or developers in the course of their business have undertaken other projects at the time on the understanding that only some will be very profitable. Of course they will hope that all will be profitable, or will at least break even, but in this hazardous business the chances are that some will prove to be unprofitable. If losses which are realised for development land tax are not offsettable against the gains for develop-

ment land tax, this must inhibit the degree of land activity and building.
We are seeing another example in which the technical provisions of the Bill have been hedged about by the practical requirements to conform with the net-of-tax provision on the sale to local authorities. This is a levy, not a tax of the ordinary kind, and without such relief as that which we are seeking in New Clause 12 there will be more delay, fewer schemes carried out and greater costs. I cannot believe that that is what the Government want. Therefore, I commend the new clause to the House.

Mr. Denzil Davies: I do not think that the hon. Member for Hitchin (Mr. Stewart) will be surprised if I give a negative response to the new clause. I must make it clear that what we are talking about is a tax on betterment and not a tax concerned with the profits of a development. The tax draws a distinction between profit or gain made as a result of betterment and that made at a further stage in a development where the developer makes a profit by putting up buildings which people particularly want to buy or live in.
We are concerned with a betterment gain which arises to a farmer, a small builder or a property company as a result of the granting of planning permission. It is not a development gain; it is a betterment gain.
The difficulty in principle of accepting the new clause, which seeks to offset loss, is that I cannot really see where the concept of betterment loss comes in. If we are to offset betterment loss against betterment gain, I cannot see where betterment loss is involved, because by definition we are concerned with betterment. If there is no betterment gain, that is the end of the situation. I cannot see how this can be turned into a negative or loss situation.
A gain on development is taxable, and if there is a loss on other developments they can be offset against the gain, but I cannot understand the concept of betterment losses set off against betterment gains. It is also difficult to identify particular projects against which a loss should be allowed.
If we were to accept the clause it would involve recasting the interaction provisions, because they are based upon a


decision not to try to introduce some form of loss relief. This point was considered seriously, but the technical problems of providing loss relief with a betterment tax were found to be considerable. In addition, there was the difficulty of accepting in principle that there could be such a thing as a betterment loss with this kind of tax. These are the sort of problems encountered in incorporating a clause such as this in the Bill. For example, decreases in current use value would have to be taken into account. Because increases are brought into the base value, decreases would have to be brought in as well. There are similar provisions concerning the betterment levy, but these will be dealt with in a later amendment.
Therefore although it appears strange not to allow a loss in a tax, we are concerned with betterment gain and that gain is isolated. There is, therefore, no such thing as a betterment loss.

Mr. Fairbairn: It seems a very artificial concept to try to isolate a gain. A gain is not isolated. It is part of the general situation of loss and gain, and it is quite improper for the Government to rely on the concept that gains are isolated while losses are not.

Mr. Davies: The hon. and learned Gentleman was not here when I began my speech and he perhaps therefore does not fully understand my argument. I was saying that this is not a general gain which can be set off against a general loss. A loss on development can be set off against a profit. We are concerned here with the first stage. When development commences, there is a charge to tax if there has been an increase in the betterment value of the land. If there has been no increase, there is no charge. Therefore, I cannot accept the concept of a loss at that point unless something special were to happen to the land, such as planning permission being withdrawn, and there are already provisions for that in the Bill. Therefore, we are isolating a gain. Once that is isolated, and it arises because of the granting of planning permission, I do not see how a loss can arise in that kind of situation.

Mr. Fairbairn: I fully understand the Minister's position, but throughout our debates he has based his case on the concept of fairness. A developer who on

an individual transaction is refused planning permission and therefore makes a loss, or who suffers a change in surrounding developments which causes him a loss, has no remedy. But if he makes a gain he is stumped. Therefore, in what the Minister calls the speculative activities of a pension fund the circumstances are similar to betting on a horse. If the horse loses, that is the punter's bad luck. But if it wins, under these proposals the Government take the winnings.

Mr. Davies: In most circumstances it would not be a case of putting on a bet. Where there is no gain and no loss, there is no bet in the first place. We are concerned with an application for planning permission—that is, the putting on of the bet—and with the granting of permission—that is, the win. Quite apart from that, it would be extremely difficult to fit into a tax of this kind a loss relief even if the development loss could be defined. The interaction provisions would have to be entirely recast because they are based upon a no-loss situation. Decreases in current use value would then have to be taken into account because increases are taken into account in computing base values. For these reasons, I cannot agree to the clause.

Mr. Graham Page: The Minister has shown quite clearly the unfairness of this measure. He has admitted that one would expect when one is charged a tax on betterment to be charged on the profit one makes. If one does not make a profit, or if one makes a loss, one is entitled to deduct that loss from the profit. That is fairness in taxation. Here, however, we are dealing with a levy, not a tax. It is a levy on a certain occasion, not even a levy on the gain. It is a levy on the estimate of the increased value of the property, and it is not impossible to assess a loss to set against a gain of that sort.
It is described in the new clause as "negative realised development value". That is not an elegant phrase, perhaps, but at least the formula is well set out. I appreciate, of course, that if this principle were accepted there would have to be a lot of other amendments in other parts of the Bill. The clause was on the Notice Paper during Committee stage and the Government could have looked at it then. If they were sympathetic to losses, they could have suggested the amendments that were required elsewhere.
Earlier in our proceedings on the Bill, the Minister saw fit to withdraw two clauses. He did not find them entirely satisfactory and said that he would reintroduce them at a later stage in a Finance Bill. I ask him tonight, because he was sympathetic to the idea of setting a loss against a gain, to look at this clause again and see whether there is some way in which fairness can be brought to the levy so that one would be able to set losses against gains. If the Minister could find some way to do this in the Finance Bill when he reintroduces his own clauses, we should be grateful. I am not encouraging any Government to increase the size of the Finance Bill, because we have spent too much time in Standing Committee on the massive Bills we already get.

Mr. Denzil Davies: I would be very happy to look at this again, but I have to choose my words carefully. The problems seem quite insurmountable. We will look at the clause and see whether it gets round the problem. If it does, we will consider putting it into a Finance Bill, but I can see great problems.
The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) quite rightly spent some time in Committee talking about the phrase "realised development value". He chastised us for using the phrase "realised development value" in circumstances where there was no such thing. Now we have "negative realised development value". I am not just making a semantic point but showing how difficult it is to isolate the concept of loss.
Without giving any undertaking, I am prepared to look at the new clause to see whether it would be possible to surmount the difficulties involved.

Question put and negatived.

New Clause 13

RECREATIONAL USE OF LAND

'In the case of land used or intended to be used wholly or mainly for the purpose of or in connection with physical recreation the carrying out of any building or other operations (other than the erection, enlargement, improvement of alteration of dwelling-houses) requisite for any of the following purposes shall not constitute material development for the purposes of this Act:—


(a) The use of that land or any part thereof by persons when participating in that recreation;
(b) erection or construction of a clubhouse, refreshment room, changing room or other premises to be used wholly or mainly by persons who participate in physical recreation on that land or of other buildings incidental to the use mentioned in subparagraph (a) above which may be required for the storage of apparatus and equipment used for the purposes of physical recreation or for the maintenance of the land for such purpose;
(c) the construction on that land of anything necessary to secure the safety of such persons as are mentioned in sub-paragraphs (a) and (b) above, or of members of the public, or to prevent damage to property'.—[Mr. Fairbairn.]

Brought up, and read the First time

Mr. Fairbairn: I beg to move, That the clause be read a Second time.
The purpose of the clause is to exempt from the provisions of the Bill land that will be used for recreational purposes. I hope that the Minister will agree that he cannot object to this clause on principle, or on the ground that it would be difficult to implement. Yesterday we discussed a new clause that replaced Clause 19, and the Government had no difficulty in defining "industrial purposes."
I hope that the Minister does not think that I am being offensive if I refer to his defence of the amazing difficulties that the Government have in being fair when they do not want to be fair, yet find it easy to be fair when they want to be fair. The whole Bill is supposed to be about fairness.
This subject, more than any other, falls within the same curtilage—if I may use that English word, with which I had such difficulty in Committee—as the new clause dealing with industrial purposes.
8.30 p.m.
In previous debates, the Minister explained why it would be improper and contrary to principle to except charities and pension funds. Surely we can at least say that political parties are positve or equally neutral on recreation.
No one can argue that one part of the community rather than another will benefit. On the Minister's concept that the community is what matters, he may argue that only certain members of the community play ping-pong, soccer or darts, so they would benefit while others would


not and the provision would consequently be grossly unfair. That argument would be even more absurd here than it has been in other parts of the Bill. Sport and recreation are, to a great extent, paid for and supported by public funds. It cannot be denied that this is partial, because not everybody indulges in sport. Some people benefit, others do not.
I think the Minister shares my belief that funds that are extracted from those who indulge in an activity, put through Government organisations or local authorities and then reapplied to that activity, obtain an infinitely poorer return than if they had been left with those indulging in the activity in the first place. That is a universal principle, from which we cannot escape. Given that sport is now a manifestation of activity within the community which is supported, sponsored and financed by the Government, it is wrong that it should have funds removed if they fall within the ambit of the Bill and reapplied by a central authority, local authority or direct funding.
I agree that there are other activities, such as the arts, to which this concept could apply. The fact that we do not have a new clause on the arts does not seem to me to be a good reason for denying that there is a good and unanswerable case on behalf of sport. I appreciate that the Minister may argue that if somebody is building a squash court, or tennis court, or a cricket ground, the £10,000 exemption will apply. After all, the Marylebone Cricket Club may own premises in which it wants to set up a pub, and it might make a tremendous profit from that concern. That would be unfair to members of a village cricket club.
Let me take Scotland as an example. In Edinburgh there has been a major development of sites containing facilities used for the Commonwealth Games. That effort involved the expenditure of many hundreds of thousands of pounds, and nowadays that figure would probably involve millions of pounds. The Commonwealth swimming pool, which was built on a prime site, was a major development, the cost of which ran into millions of pounds. Therefore, lest the Minister should use the argument that we are dealing with a minor matter with which the Bill is not likely to interfere, I wish to point out that if, for instance, Glasgow

had attempted to obtain an increase in its enormous capital debt in respect of the Commonwealth Games, that would be covered by these provisions.
It is important that the Government should not indulge in all the bureaucracy involved in removing this theoretical tax from recreational organisations and then take the view "We shall give it back to them in another way." That is a waste of money, and is unnecessary. But it does not contradict any of the principles in the Bill if we exempt from its provisions an activity that we all believe should be supported by community funds.

Mr. John Farr: I wish to support the clause, especially because I believe that this Government should adopt a consistent approach to legislation as it emerges from one Socialist Government to another.
If the Minister of State has time to do so, I should like him to examine the provisions of the Land Commission Act 1967. He will find that much of the material contained in the new clause is to be found in the 1967 Regulations, relating to material development, made by the then Minister of Housing and Local Government under sections 98 and 99 of the 1967 Act. All that this new clause is seeking to do is to establish the position that was established in the Land Commission Act.
The new clause deals with three specific purposes, for which it is proposed that land may be developed for physical recreational purposes without the payment of development land tax. Paragraph (a) relates to the use of land for physical recreational purposes. A great deal of constructional work is involved in preparing a site for such purposes, namely, levelling, drainage, landscaping, re-seeding, the laying of artificial surfaces, underground heating, and other expensive developments.
Subsection (2) of the clause relates to the building of clubhouses, refreshment rooms and changing rooms and other premises necessary for the storage of equipment. The third subsection relates to the safety not only of those who participate in an event that takes place at a recreational ground or establishment but also those members of the public who may be spectators at such an event.
I warmly support the clause. There are at least two important points that the House should bear in mind. The first relates to an Act of Parliament which the Minister has surely heard of although he may not have actually had a part in its formation. I refer to the Safety of Sports Grounds Act 1975. The Minister may not even be aware that this Act is on the statute book. In fact is was prepared by, and inherited from, the outgoing Conservative Government. It had all-party support and became the law of the land in 1975. The Act lays upon the operators of establishments for physical recreation many serious obligations. Section 2 states that a local authority may require the operators of a stadium or stadia to make various alternations, such as constructing crush barriers, erecting safety barriers, tunnelling, and many other additions to the stadium.
Section 2(1) gives a local authority the power to lay down almost any conditions and, if they are not complied with, to say that the stadium, or site, will not be allowed to continue for recreational purposes. When one looks at the Safety of Sports Grounds Act, with the very onerous burdens that are placed upon those concerned with the operation of certain recreational grounds, one sees that it is not right and proper that they should be penalised by development land tax for carrying out their duties as specified in the Act.
The other point that I wish to make concerns the whole attitude of the Government in producing this Bill and placing it before the House. It concerns the whole attitude of the Government in relation to those who have engaged in sporting activities, or recreational activities of any sort whatsoever. I hope, for instance, that the Government are not making the same mistake as that which they made in 1975 over the Community Land Act.
The Minister may have heard of the Central Council for Physical Recreation and its responsibilities to sport in this country, in particular, in advising the sports councils. The council, in its annual report for 1974–75, had this to say about this Government and the Community Land Act:

This major piece of legislation was prepared by the Government without any proper consideration to its possible repercussions on Sport and Recreation.
The CCPR, as it is known, is an entirely impartial body. It is distressing to find that when one has had a major Act, like the Community Land Act, put on the Statute Book, no attempt has been made by the Government of the day to consult those who are responsible for sport and recreation in Britain. I hope that the Minister, in bulldozing the Bill through the House has had a little concern about the White Paper on Sport and Recreation published by his Government in August 1975. I do not suppose, that he has read it—

Mr. Denzil Davies: indicated assent.

8.45 p.m.

Mr. Farr: I am glad that he is honest enough to acknowledge it. I shall read a couple of significant paragraphs. It is not desirable that the Minister should completely ignore the contents of the White Paper, because they give a firm indication of Government policy towards sport and recreation.
Paragraph 5 says that
The Government accept that recreation should be regarded as 'one of the community's everyday needs' and that provision for it is 'part of the general fabric of the social services'.
In paragraph 56, dealing with priorities, the White Paper talks about areas of special need and says that
The House of Lords Select Committee recommended that 'recreational priority areas' (inner urban areas which have suffered from environmental deprivation and have lagged behind particularly in recreational provision) should be defined and given special financial assistance for recreational projects. The Government are deeply concerned about the problems of urban deprivation and are in full sympathy with the aims of this recommendation.
I think that the whole House is in sympathy with them.
It is a pity that the Government have not shown more sympathy, not only with legislation of a previous Socialist Government—the 1967 Land Commission Act—but with their own White Paper, of August last year. I hope that they will accept the new clause.

Mr. Hector Monro: I support the new clause. The Government


seem to be cutting the throat of sport and recreation, which all Governments have been trying to help for a long time. Their attempts have not borne substantial fruit, but at least national resources do reach sport and recreation through the Sports Council and local authorities. However, an enormous amount of that money is taken out in VAT, rates and corporation tax.
We are still awaiting a debate on the White Paper published last August, which gave encouragement but no resources to sport and recreation. This tax, in conjunction with the Community Land Act, will have a detrimental effect on sport and recreation generally.
What consultations has the Minister had with the Central Council of Physical Recreation and the Sports Council? My inquiries suggest that they have been minimal.
Two main propositions arise under the new clause. The first concerns major sports grounds. We want to see improvements for the sake of the game and the spectators, and to help the implementation of the Safety of Sports Grounds Act.
Second, an announcement of the designated day is long overdue. It will inevitably come before next Session, and certainly within the next 12 months. Implementing the code and the regulations set down by local authorities will cost a substantial sum.
One way in which this money might be raised to finance the provision of safe facilities—which we all accept and applaud—would be for the large grounds to sell off a corner site, or an acre here or there, for development. The proceeds would be taxed extremely severely, so that little cash would flow to the organisations owning the sports grounds. Therefore, little money would be available for the development of safe facilities at the sports grounds.
The Minister must have more sympathy with the application of the new clause to small clubs. I refer to those clubs that are run mainly by voluntary organisations. These days, in view of the high cost of running sports grounds and sporting facilities, it is not infrequent for two or three clubs in a town or city to combine, pool their resources, and have one play-

ing field, one pavilion, one set of changing rooms and stands, plus squash and badminton courts. If two of the three clubs sold their premises for development so as to obtain an enhanced income—always accepting that planning permission was available—they would be clobbered by this legislation.
There is no point in saying that some of the clubs might be registered as charities, as I do not think that they would benefit under the provisions of the Bill.
I have had much correspondence with the Minister of State for Planning and Local Government—who has not often been present at the discussions on this legislation—especially about the Community Land Act, which triggered off this legislation. He wrote to me in April and said that there would be an exemption in respect of the type of case to which I referred. He referred to building extensions of up to 10 per cent. of the existing facilities, or 1,000 square metres. That will not take us very far in trying to obtain money for development or for improving the facilities of sports clubs.
The second exemption would apply to new buildings of less than 1,000 square metres. That may do for a modest pavilion and changing rooms, but it will not cover grounds or buildings sold to provide money for sport and recreation. That kind of sale would be hit comprehensively. We welcome the encouragement given for better sporting facilities. Clubs should have income-producing facilities, such as club bars, so that money may be generated for them to use for the improvement of existing facilities. However, all that the regional councils of sports and physical recreation are contemplating is being thwarted by this legislation.
Larger sports grounds, especially cricket grounds, may wish to sell off portions of their sites so that their facilities may be developed. Sports clubs may wish to amalgamate and sell off small portions of their ground so that the proceeds may be used to the advantage of their other facilities. I hope that the Minister understands that this Bill and the Community Land Act will destroy those efforts.
If the Minister does not accept the new clause, I hope that he will at least accept


the principle of helping sport and recreation, and will be prepared to table his own amendment at a later date.

Mr. Clegg: I congratulate my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) on introducing the new clause and join those of my hon. Friends who have argued in support of it.
I pay tribute to the Minister for the great courtesy and stamina that he has shown. It is matched only by that of my right hon. Friend the Member for Crosby (Mr. Page). I thought at times today that the Minister looked like Horatio on the bridge. The troops are still coming up to support him, but they have not yet arrived. This particular rank of Tuscany can scarce forbear to cheer.
This is an important new clause. I speak to it now because recently the North-West Conservative Members' Group had a deputation from the industrial areas of Lancashire—particularly Merseyside—about the lack of facilities for recreation or, as they put it, "for play." When I first heard of the deputation coming to see us and went along to meet these people, I had some doubt about their claim, especially in these days of restrictions on Government expenditure. But as I heard about the part that they were playing in the battle against vandalism and juvenile crime, I was impressed by what they said. I should hate anything in the Bill to stand in the way of proper facilities being provided in city centre areas where most of these problems exist. I am talking not of lush, professional, splendid recreation centres, but of quite primitive places.
I am perhaps unnecessarily perturbed that, without the new clause, the development land tax, especially in city centres where land is very highly priced if it has development potential, will stand in the way of the good work that is being done by these people, who in fact work for very little. If the Bill in any way aggravated the problems of vandalism and delinquency, it would be doing an evil.
For those reasons, concentrating not on professional or spectator sport but on the recreational use of land, there is a

great social purpose here which could be ill-served by the Bill unless it contained the new clause.

Mr. Patrick Mayhew: I apologise for having missed the speech made by my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) when he introduced the new clause.
I excuse my short intervention in the debate on the ground that one has only to read the terms in which the clause is expressed to appreciate at once the merit of the proposal.
What good purpose can the Government have in mind in seeking to apply development land tax to land used for recreational purposes? I suppose that the revenue that it is hoped this application will yield will be the tiniest fraction of a drop in the ocean compared with what this or any Government are likely to need, but to the sports clubs and others who are trying to play some part in improving the lot of those in inner city areas who are very short of recreational facilities, referred to by my hon. Friend the Member for North Fylde (Mr. Clegg), the money that they will have to find to pay the tax is far more than a drop in the ocean; it is a substantial component of their life blood, and it seems to me that if they are to be mulcted by DLT it will have the effect of preventing their going ahead with improvements that otherwise they would start—improvements that are necessary and for which they may have painfully gathered the necessary funds over many years.
9.0 p.m.
I hope that the Minister will ask himself: "What good are we really seeking to achieve? What can we hope for as a result of this application of the tax? Is there really going to be any tangible advantage to the public interest?" He will be able to say, of course, that the principle of the Bill is being applied consistently, and I concede that sometimes there is advantage in consistency and in keeping to an absolute minimum the number of exceptions.
As one of my hon. Friends pointed out, it is Government policy to encourage those who are seeking to expand recreational and sporting facilities to mitigate the disadvantages of living in large urban concentrations. If that is


the policy of this Government, can it be said that there is any sensible or tangible advantage to be sought from applying the principle of the Bill to those who wish land used for recreational purposes? One asks, how is the money to be found? It is a curious principle of the Bill that the tax has to be paid before one starts the development.

Mr. Farr: My hon. and learned Friend asks how the money is to be found. The House will know that last year we passed the Lotteries Act 1975, which empowers groups of people and others to engage in lotteries for the improvement of sporting facilities, among other community projects. I put it to my hon. and learned Friend that the House should be aware that, if the Lotteries Act is brought into use in a community for the provision of, say, a new sports or recreation hall costing £20,000, by the provisions of the Bill the sum that local people will have to raise will be no less than £100,000.

Mr. Mayhew: That is a highly relevant point and one that will never be appreciated in the country. People still have some faith in the sense of Government and Parliament. No layman could possibly assume that we would pass legislation that would have that consequence. Once it dawns upon people that that is the consequence of a Bill of this kind, one can readily imagine the effect it will have on those who hitherto have been generous in responding to charitable appeals and who have put their hands into their pockets for money to buy lottery tickets. Once they realise what my hon. Friend has just pointed out—that a proportion of that magnitude out of everything their lottery produces must go to the Revenue—they will say "That is the end of it. We are not going to subscribe to anything so stupid."
The point is not improved by being belaboured. I merely say in conclusion, having sat last night through the debate on the application of the Bill to charities, having heard the arguments adduced by speaker after speaker on this side of the House and having heard the deafening silence on the Government Benches, whose Members at least did not seek to defend the indefensible but left that unenviable task to the Minister, who tackled it with his usual ability but without the slightest manifestation of enthusiasm—

and who could be surprised?—that I see at least consistency here.
Here the Government, as last night, out of considerations based solely on doctrinaire consistency, are seeking to apply to those who they realise are trying to help them, in ends that the Government themselves wish to attain, a tax the consequences of which can only be to hinder, obstruct and hamstring those voluntary organisations. In the same way as when my hon. Friends last night were able to list the categories of voluntary organisations that wish only to be able to help the Government to achieve what the Government are manifestly failing to achieve satisfactorily and sufficiently themselves, if the Government persist in objecting to this clause, they will be perpetuating their failure.
One thinks of the Duke of Edinburgh's playing-fields scheme and the numerous charitable organisations and others of a sporting nature that seek to provide improvements for their local communities on a recreation ground that is available. They will be hamstrung, obstructed and hindered in just the same way. I beg the Minister to take this to heart and tell us, when he replies to this wholly one-sided debate, how objection to the new clause can possibly be justified.

Mr. Denzil Davies: Hon. Members have asked me to extend an exemption, as set out in the new clause, to the recreational use of land, mainly in the case of physical recreation, which is what the new clause deals with. The main objection to the new clause—the hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) touched upon this—is that here we are being asked for an exemption for one particular activity. It is an extremely worthy and good activity, but other activities are equally deserving. No doubt they would also wish exemption from the legislation. In the development of theatres or opera houses—a cultural, not sporting, activity—the case would be the same as for the development of sports grounds. Therefore, if one were to allow exemption in this case, I should have thought that one would have to give exemption to other worthy causes to be consistent. That is one of the difficulties.

Mr. Fairbairn: Please let us not add this terrible Socialist principle that, if


everyone does not get something, no one will be allowed to have it.

Mr. Davies: It is not a case of no one being allowed to have this if everyone cannot get it. We come back to the basic point of whether we should use taxation to further certain causes and ends, and whether we should assist sport by a relief from a special tax, a particular tax, which is what we are being asked to do. We are being asked to relieve one particular activity from taxation in order to assist that activity. A better way of assisting sporting organisations and cultural organisations is not to be found through the tax system, which should not be used for these purposes. By and large, although there always have to be some exceptions, the tax system should have as few exemptions as possible.
If the Government want to spend money on various activities and bodies, they must decide, by means of a debate on priorities, how they are to allocate resources. However, once one starts along the road of using reliefs from taxation to assist various causes that the Government think worthy, one finds that it is a dangerous road to travel. It has been a basic principle of public expenditure and public finance that we try not to do that. We try not to give specific relief for specific organisations. We try to deal with matters through public expenditure priorities.
I accept that the tax is slightly different because it may be imposed on one activity in one community. But we are being asked to exempt a body, a recreation or acitivity from that tax to assist that activity. If we did that, there would be other cases and we would then be using taxation for social purposes, which I do not believe to be desirable.
There may be some cases where the tax will have to be paid. The example was raised in Committee of the Worthing Rugby Football Club. In most cases, however, there will be no tax to pay because of the £10,000 exemption. I do not argue that a minority would not have to pay a considerable amount of tax, but because of the exemption and the base rate the small football or rugby club is unlikely to have to pay the tax. We are concerned with a minority of cases where there might be development value, but

if we accepted the proposition it would be difficult to know where to draw the line. Other organisations would understandably ask for relief, and there would be no way to confine exemptions which would be fair to the totality.
I ask the House not to accept the new clause, but I am in considerable sympathy with those who wish to help sport. I am not sure that the taxation system is the best way to help. It would be better to do it through public expenditure and public finance.

Mr. Monro: The Minister is basing too much of his argument on the fact that the tax will not affect many clubs. I examine large numbers of sports clubs' balance sheets and I know what it costs to provide the minimum changing-room facilities. The sum of £10,000 is not much. One would obtain only very meagre facilities for £20,000. It would cost even more if a club wanted reasonabe social facilities in order to generate income.

Mr. Davies: I am not only arguing about the £10,000 exemption. One has to calculate the gain one gets against the base value. Certain base values have to be deducted from the price paid for the land. The sum of £10,000 is probably sufficient in most cases. The hon. Member for Dumfries (Mr. Monro) will know that there is already a charge for development gains on clubs at the corporation tax rate of 52 per cent. That measure was introduced in 1974. I understand that there were no amendments then and that it was not considered to be a problem. There have been no representations about the development gains charge which relates to betterment if clubs want to develop. We are not imposing a completely new tax because a tax already exists, although I accept that the rates will be higher.

Mr. Fairbairn: That must be the 114th load of sympathy that I have received from the Minister. I remind him that activities like sport are not run on sympathy; they are run on cash. It is offensive to hear the same argument again and again in which I do not believe the Minister believes. He tells us that we are absolutely right and that the Government have sympathy with the idea but unfortunately there may be other organisations in the same situation and it would


be unfair. In order not to be unfair to them we have to be unfair in this case as well. That is the logic of the spurious argument that I have heard from the Minister in Committee and in this debate. It is a bad and wicked argument. The Minister's position is indefensible.
9.15 p.m.
The hon. Gentleman was saying, in effect "If we go down what I agree is a good road, there is no end to the number of good intentions that we may carry out. We may help the arts, which we help anyway. We may even help theatres, sports clubs and all sorts of other things which we never intended to help in this way but which it is our policy to help. We cannot start down such a golden road in case we do some good."
I am concerned about the arts. If the theatres want this exemption, perhaps the Government will grant it. If the Government think that the theatres should have it too, let them give it to them; it is the Government's Bill. But let them not say "Sport shall not have it, because other organisations should have it as well." The Government can amend the Bill in another place if they wish.
The second argument, which I have heard again and again and which I find equally offensive, is that in most cases there would be no tax. In other words, the fact that a grave injustice would be done in a significant number of cases does not matter provided a lot of people fall below the tax line. That is not a realistic concept. The ordinary football club is now in grave financial difficulties, certainly in Scotland. Incidentally, the great interest shown by SNP Members is worthy of note. They are once again absent. The football club often has to build a supporters' recreational facility in order to obtain funds from the sale of alcohol and from membership subscription that make it viable. Under the Bill, that facility is liable to tax at 80 per cent.
My hon. Friend the Member for Dumfries (Mr. Monro) said that one cannot build much for £10,000 nowadays. One cannot build a supporters' recreational club today for less than £400,000. That must be spread over the whole ground, but the increased development value may well land the club with a tax payment of more than £100,000. What football club now compelled to comply with

all the safety regulations will be able to find that sort of money for tax?

Mr. Michael Spicer: Is this not a perfect example of the case where there are no genuine gains—nor are there likely to be any—but there is tax?

Mr. Fairbairn: I am obliged to my hon. Friend. The Government seem unable to get it into their heads that there is no such thing as a charity, pension fund or sporting organisation with more money than it needs. These organisations need all the money they can obtain to carry out their functions.
The Minister's third point was that if the Government wanted to fund such organisations it would be better done by tax. He said "We should use the taxation system to promote certain activities. It would be fair to the general totality"—

Mr. Denzil Davies: I said that we should not use the taxation system; that there is a danger in assisting organisations by giving them exceptions in fiscal legislation. It is better to assist them through the normal channels of public expenditure.

Mr. Fairbairn: I am grateful to the hon. Gentleman. I do not want to get his concept wrong. I think that I understand what he says, which is that if one is to be unfair enough to give facilities to those who play games and not to those who do not, it should be done through the general tax system and not by exemption.
If I noted the Minister's words correctly, he said that it would be fair to the general totality, but it is not fair to the general totality, if fairness or equality is to be the criterion, that those who play cricket, football or ping-pong, ride horses and do all the other things recreationally, receive support, while those who play bowls, darts and other similar activities, or play nothing at all, do not get it. That is awfully unfair.
Clearly there is discrimination. Let us not be fussy about the concept of discrimination. We discriminate in sport in favour of those who play it and in favour of the sports that need the money. We discriminate against the sports that do not need the money and against those who do not indulge in sports. Let us not talk about the absurd equation of ultimate fairness to the general totality.

Mr. Michael Spicer: Does my hon. and learned Friend accept that this is a perfect example of how we can play the game the Minister's way? The Minister has mentioned discrimination, and we are discussing an activity that is doing badly for cash. As activities that are doing badly are subsidised by the Government—it was argued yesterday that we should discriminate in favour of the manufacturing sector, because it is doing badly—is it not possible to throw back the argument that a certain activity is doing badly and that we should therefore discriminate in its favour?

Mr. Fairbairn: I am obliged to my hon. Friend. That is the next stage in the argument. That demonstrates the fallacy of the Minister's argument. The hon. Gentleman says that it is wiser to fund the money for sport through the Government, and to put it back into sport because it is doing badly, but that is a complete waste of money. In that way we use 100 times as much money as the original organisation would have used if left to its own resources.
This is part of the meanness and the lack of imagination of the Government. They take the attitude that those who do not like food shall not be allowed to prevent those who do like it from eating, and that those who like it shall not be allowed to prevent those who do not like it from starving. That is the concept of the absurd generality into which the Government have placed themselves.
This is a small clause. It deals only with recreation and sport. Sport does no one any harm. Socialists indulge in it, as well as everyone else. It would be a sensible exception. Whatever other exceptions the Government may think of, let them grant it to them, too. The Government adopt the Scrooge-like attitude and say "Because you have not thought of all the others, none shall have anything to eat". They say "If everybody does not get a lollipop, no one shall have a lollipop". That is the fallacy of the hon. Gentleman's argument.
I believe that we are a sporting race. With great difficulty we are trying to send a team to the Olympics. For goodness sake, do not let the Government go away with the charge that their meanness, hardness and lack of imagination has ensured that sport has been deprived of

the few sources of funds it had by this absurd, unfortunate and ruthless tax.

Question put and negatived.

New Clause 14

MORTGAGEES' DISPOSAL TO EXEMPT BODIES

'Nothing in section 39 or Schedule 7 below shall authorise a body described in paragraphs (a) or (b) of subsection (1) of section 39 when acquiring an interest in land in which a person is entitled to a security or to the benefit of a charge or incumbrance affecting that land to deduct from the amount payable by way of consideration upon that acquisition any sum in excess of the amount (if any) by which that consideration exceeds the principal, interest and costs payable to such person in order to discharge his security, charge or incumbrance; and this section shall apply to acquisitions of such land either from the owner of an interest therein or from a person who is dealing with that interest for the purpose of enforcing or giving effect to his security, charge or in-cumbrance'.—[Mr. Graham Page]

Brought up, and read the First time.

Mr. Graham Page: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): With New Clause 14 we may take the following amendments:

No. 94, in Clause 39, page 62, line 31, at end insert—
'Provided that no deduction shall be made in respect of such part of the consideration as is paid to a mortgagee'.

No. 182, in Schedule 7, page 149, line 14, leave out
'entered into on or before 12th September 1974'.

Government Amendment No. 183.

No. 184, in page 149, line 24, leave out 'be' and insert 'not exceed'.

No. 185, in page 149, line 41, leave out
'entered into on or before 12th September 1974'.

Government Amendment No. 186.

No. 187, in page 150, line 6, leave out sub-paragraph (4).

No. 189, in page 150, line 21, leave out from 'Act' to end of line 31.

Government Amendment Nos. 190 and 191.

Mr. Page: The new clause deals with the disposal of property to exempt bodies


by the mortgagee. Perhaps I may put on record some matters which are familiar to those who were in Committee but which may be a little difficult to understand for those who were not involved in our deliberations at that stage.
When property is disposed of—namely, sold—to an exempt body, including a local authority, the exempt body, in paying the purchase price of the property, can deduct the development land tax from the purchase price and pay over the balance, taking for itself the development land tax. There are formulae as to the amount to be deducted, but if the realised development value is substantial, so also may be the 80 per cent of that which will represent the tax. It may be quite a large sum. It may be a small sum which can be deducted from the purchase price by the local authority or other exempt body.
Let us suppose that the property is mortgaged and that the mortgagor is in default. The mortgagee therefore exercises his power of sale and sells the property again to an exempt body. When the Bill emerged from Committee, there was a provision that the local authority could deduct tax which might exceed the amount of the mortgage, so that the mortgagee, exercising his power of sale and exercising the security which he had for the loan of money, might find that he was paying the tax, or Dart of the tax, of the owner of the land.
That would have placed the local authorities in a preferential position as against secured creditors, and even the normal tax inspector does not claim to do that. Indeed, on other taxes they are preferred claims, ranking in priority over other creditors. The one who holds a security, such as a mortgage over land, is entitled to stand back from that situation and say "No, I rely on my security. I will dispose of my security, take my mortgage money out of that and pay over the balance"—where there is no bankruptcy—"to the individual owner himself", or perhaps to a second mortgagee. In the case of a bankruptcy, it would be paid over into the bankrupt's estate.
Under the Bill as it came from Committee, the local authority could take its development land tax out of the purchase money, that is to say out of the money it had to pay—it might be paying it to a

mortgagee who was selling—in priority without regard to the amount secured on the property. This did not apply, as the formula was devised previously, to a mortgage which had been entered into prior to 12th September 1974, the date of the White Paper. In that case the local authority could not deduct so much from the purchase price that it would be taking some of the money needed to pay off the mortgage.
Strangely enough, the local authority is directed in that case to take the whole of the balance of the purchase price over the mortgage as the deduction of tax. I cannot really think that that was the intention, but that is how it appears in an amendment in the group which we are discussing with the clause.
The purpose of the clause is to say that the local authority shall never deduct more in tax than the difference between the amount which is needed to pay off the mortgage and the total amount of the purchase price—that is to say, it can only look to the amount of the equity over and above the mortgage for the recovery of tax. This would restore the traditional legal position of a secured creditor—a mortgagee who had his security in the property—and make it quite certain that he would get back the amount which he had lent on the security of the property.
9.30 p.m.
I appreciate that, if that is the case, it is quite possible for an owner of property to mortgage his property up to the hilt and then default—the mortgagee sells, takes his mortgage out of the property secured, and leaves nothing for the local authority to deduct by way of tax. That is just too bad. This is the position in the case of any tax which is owed by a defaulter—which is owed by some profligate person who has borrowed up to the hilt on his securities.
It is our contention that, although this is an extraordinary tax—a levy and not a tax, perhaps—it should not be given priority over and above the secured creditors. If this were a sale to a private individual—if the mortgagee was selling not to a local authority but to a private individual—there would be no question about it. The mortgagee would be entitled to take his whole mortgage money, costs and interest out of the proceeds of


the sale. But, merely because of this system of purchase net of tax, to which we object strongly, the mortgagee is quite likely to lose part of his security when he comes to sell.
Until now, I have been dealing with the end of the transaction—with the mortgagor defaulting and the mortgagee selling. But those who are about to lend money on the security of property will have realised that this might happen and that they might find, if their borrower defaulted, that their security might be worthless in the case of a large realised development value.
It seems to me that by these provisions we are putting the normal process of financing in grave jeopardy. What bank will lend to its customer on the security of property if it feels that at some future time. if it has to resort to the sale of that property as a mortgagee, it might not get back the amount lent? It might be all right if it is a fully developed property. I imagine that in most cases of loans on dwelling-houses, perhaps by building societies, it is unlikely that that will happen. It means, however, that loans on farms, for example, will be put in very severe jeopardy, ase will loans on commercial or industrial property where there is a possibility of development. Therefore, if the property is sold, there might be quite substantial tax to be paid out of the realised development value. I feel that there is grave danger of disorganising and disrupting the whole business of finance to the individual borrower if this provision is allowed to remain as it stands.
In the Government's amendments which are grouped with the new clause, the Minister has conceded a little bit. As Schedule 7 stood when it was introduced to us in Committee, what I have been describing as the possible loss of the mortgagee could not happen if the mortgage had been taken out before 12th September 1974. In the amendments now on the Notice Paper, the Minister has changed that date to the date on which we had the Committee discussions. That is the date on which this could have been known to members of the public had they taken the trouble to listen to our Committee debates.
I pity any member of the public who has the unfortunate job of doing that. Even so, it means that from that date last

month any mortgagee is at risk with his security if he is lending money on a property which may have a development value. This is extremely dangerous to the financing of development and to any matters of finance.

Mr. Clegg: I support what my right hon. Friend said in moving the new clause. He is a practising solicitor, like myself, and he knows the vast changes that this Bill, if it goes through unamended, will bring to those lending money on land. It is clear that at the moment it is much better that the mortgagee who has a power of sale should sell to exempted bodies and leave the Revenue to recover the tax. It is the peculiar format of this Bill, being so closely linked with the Community Land Act, that has led to the apparent anomaly.
I accept that this will not apply to building society mortgages on private houses. I am not raising a scare on that issue. Where it will be felt—I have had these fears expressed to me by merchant bankers—is in the area of support for financing development. Bankers are very worried about the effects of the Bill and feel that it will inhibit finance coming forward in the future.
I am thinking particularly of the case in which a builder has a land bank and is buying land, and the mortgage comes after 11th May—the date in the Government amendment. The fear is that the finance company or the merchant bank will not lend the whole amount secured on several plots of land with development value. In future, if the Bill remains unamended, the mortgagee must look at the situation and see that the amount that he can lend on a particular piece of land is the current use value plus 20 per cent. of the development value. That will be the absolute limit of his lending. The difficulty of this figure is that at the time of the lending transaction it is not always easy to calculate how this is going to be done. As a result, there will be a degree of uncertainty and doubt in lending transactions which is not there now. The one thing that bankers and finance companies dislike is uncertainty.
Unless the clause is accepted we shall have a hiatus in money coming forward for development—money that is badly needed, especially in industry and house-building, as the Minister pointed out.
If we disrupt the confidence of those who lend money and lead them to believe that they are not going to get their money back, or that the State will grab their money before they do get it back, they will not lend at all. I would have thought that this was not in the Government's interest or, indeed, in the country's interest. The flow of funds should not be slowed down or put at risk by the provisions in the Bill.
Such a hiatus could well interfere with the Government's plans for industrial expansion. It is wrong that those who lend money should find the State stepping in ahead of them and taking first grab. The State should do what it does in every normal transaction and take its place in the queue. If this had been a Department of the Environment Bill and not a Treasury Bill that is what it would have done.

Mr. Ian Stewart: I support the clause. I do not wish to add anything of substance to what I said in Committee. The more thought that is given to the problem of mortgagees in this situation, the better. I have had discussions with fellow members of the banking profession and with those who are concerned with lending money against the security of property. They are experiencing increasing anxiety.
Whatever the Government's reaction to our proposal, and whatever form the Bill eventually takes, I hope they will realise that if the situation remains as it is the amount of money available for lending against the security of property will be significantly reduced. That applies not only in the development of property but to lending for other purposes where property is the security involved. I hope that the Minister is fully apprised of the seriousness of the situation.

Mr. Denzil Davies: The right hon. Member for Crosby (Mr. Page) so ably moved the new clause and explained it and the Government's amendments that I shall not have to spend long on explanation. The Government's amendments substitute the date of 11th May 1976 for 12th September 1974 as the cut-off date for the limitation of the DLT deduction. Any money lent before that cut-off date will not come within the new régime but will be dealt with in the way the right hon. Gentleman would wish all mort-

gagees to be dealt with in relation to local authorities.
The date of 11th May 1976 was not the date on which we discussed this matter in Committee. It was the date when the Government's amendments dealing with the tax scheme first appeared on the Notice Paper. It was felt that on that date those who watched these matters—professional advisers, for example—would know whether the net-of-tax arrangements would affect the repayment by a mortgagee of money in respect of his security. We have therefore moved the date forward.
The right hon. Gentleman said that because of the net-of-tax arrangements we were giving a local authority priority to collect tax before the mortgagee got his money from his security. We will not be giving it to the Inland Revenue. The Inland Revenue has to go along afterwards to get its tax from the mortgagor if he sells on the open market in a private deal. If the sale is to a local authority, a curious by-product of the arrangements is that the authority acquires a right of priority in respect of tax. It gets the tax before the mortgagee gets his money if there is not enough money to pay the mortgagee.
I recognised that this might be a problem when I dealt with the matter in Committee. We have considered it fully, and obviously we do not want to inhibit commercial lending in this area. There might be problems in using the property as a security for other loans, but beyond that I do not think that there will be great difficulties. I do not think there is a problem in borrowing money to buy land. If a farmer wants to buy a farm with a current use value and no development value, he will get a mortgage for 85 to 90 per cent. of that current use value. If a person pays a high price for land with development value and seeks to mortgage that land to secure the purchase money, he will get 80 or 90 per cent.—or whatever the percentage is—against the purchase price. Therefore, he will be getting less than the full value of the land. Again, I do not think that there will be a problem.
9.45 p.m.
The point made by Opposition Members is that a loan may be sought on


the security of a piece of property, with hope or development value but without planning permission, in order to use the money for some other purpose. They say that if the local authority acquired the land and deducted 80 per cent. tax it might inhibit that kind of transaction. But is it always very sensible for transactions to be financed in this way? Perhaps this is not a very sensible or prudent way.
I accept that in future, banks and institutions which lend money will have to take account of the fact that land which is the security of the mortgagor may be purchased by a local authority, with the danger that the mortgagee will not get his full security because the local authority will deduct tax. However, banks and financial institutions will no doubt adjust their lending to take account of this fact, which is now well known.
We shall keep the matter under review, and if there appear to be difficulties we shall look at it again. We do not wish to inhibit commercial lending or to create problems. However, it is extremely difficult to devise wording to cover these circumstances without opening the door to the creation of artificial mortgages which would prevent local authorities acquiring net of tax. I know that the Opposition do not like the net-of-tax provisions, but this is a problem which we have to take into account. We shall keep the matter under review and reconsider it if we receive representations about problems or difficulties. At present, I can go no further than the Government's amendments and I cannot recommend the House to accept the new clause.

Mr. Graham Page: The Minister referred to a curious by-product of the net-of-tax purchases by exempted bodies. We are getting an increasing number of by-products, and they are becoming curiouser and curiouser. We are becoming increasingly convinced that the net-of-tax procedure for purchases is wrong. There has to be an assessment of the person liable for the tax that is paid to the Inland Revenue, which accounts to local authorities for the amount that the Government think they should have out of the tax.
If the new clause is not accepted, every institution that lends money on the security of property will lend only at current use value plus 20 per cent. It will take into account the fact that 80 per cent. of the realised development value may be taken from it by a local authority if there is a sale to that authority.
When the second appointed day under the Community Land Act arrives, 100 per cent. of realised development value will be paid into the pockets of local authorities. Prospective lenders will have to value a property at current use value. Only that value will be the security for the mortgage. Anything else may go to the local authority.

Mr. Denzil Davies: Current use value could be very high. It could be development value. It might reflect the granting of planning permission and could therefore be a high base value.

Mr. Page: The Minister has forestalled me. I was using the shorthand term "current use value". I was going on to say that the lender not only has to do that if he intends to lend money; he must also look up Clause 5 to understand what is meant by "base value". He then has to decide whether the base value is likely to fall within paragraphs (a), (b) or (c). The owner makes that decision in the end. He must then work out what will be the base value over the period when a tax rate of 80 per cent. will be imposed on realised development value. It puts a mortgagee who is prepared to lend money on anything other than a fully developed property in a difficult position, and will disorganise the financing of the development of the property.
Also included for discussion with the clause was Amendment No. 184. Since the Minister did not mention that amendment, I must deal with it. That amendment relates to paragraph 8 of Schedule 7, on page 149 of the Bill, and says that in the case of a mortgage where the mortgagee is selling and the local authority is entitled to deduct tax—I quote from lines 24 to 26—
the DLT deduction relevant to the material disposal shall be the amount (if any) by which the consideration for that disposal exceeds the cost of redemption of the mortgage or charge.


That means that the local authority is to tax the whole of the balance, and indeed is ordered to take the development land tax as a deduction to be made.
Amendment No. 184 seeks to delete the word "be" and to insert the words "not exceed". Therefore, the provision would read:
the DLT deduction relevant to the material disposal shall not exceed the amount (if any) by which the consideration for that disposal exceeds the cost of redemption of mortgage or charge".
That must have been what was meant. The tax may not amount to anything like the equity or the mortgage money in the sale price. It cannot mean that the local authority is entitled to pocket the whole of that balance, regardless of the proper tax, or what the tax may be according to a formula in another part of the schedule. This must be an error in drafting, and the Minister would do no harm by accepting Amendment No. 184.
Even with the addition of the amendment, the whole procedure is extremely damaging. I wish that the Government could accept new Clause 14, which would remove this damaging provision from the Bill.

Question put and negatived.

New Clause 15

ASSESSMENT PRIOR TO DLT DEDUCTION

Except by the consent of the chargeable person and of the relevant creditor (if any) defined in subsection (2) of section 46 below, section 39 and Schedule 7 below shall have no effect unless and until the Board have issued a notice that the material disposal does not give rise to any liability for development land tax or a notice of assessment to development land tax in respect of that disposal; nor shall the acquiring body have any right of entry (by virtue of a compulsory purchase order or otherwise) to enter on or take possession of the land the subject of the disposal'.—[Mr. Graham Page.]

Brought up, and read the First time.

Mr. Budgen: I beg to move, That the clause be read a Second time.

Mr. Speaker: With the new clause we may also take the following amendments: No. 92, in Clause 39, page 62, line 21 at beginning insert—
'(1) This section applies to a disposal in respect of which—


(a) the chargeable person and the relevant creditor (if any) defined by subsection (2) of section 46 below have given their written consents that it shall apply; or
(b) the Board have issued a notice that the disposal does not give rise to any liability for development land tax or a notice of assessment to such tax in respect of it'.

No. 93, in Clause 38, page 62, line 27, at end insert:
'if before the disposal occurs the Board make an assessment to development land tax in respect of that disposed, then'.

Mr. Budgen: The object of this new clause—

Mr. Speaker: Order. I am afraid that I have been a little lax, because I note that the hon. Member for Wolverhampton, South-West (Mr. Budgen) has not appended his name to the new clause.

Mr. Graham Page: In that case, Mr. Speaker, I formally beg to move, That the clause be read a Second time.

Mr. Budgen: The object of the new clause and the two amendments to be taken with it is to prevent local authorities from having the right to be able to deduct development land tax from the amount that they pay to those from whom they have purchased land in an arbitrary way.
The system that would obtain in the event of the Bill remaining in its unamended form would leave to exempt bodies, that is to say, local authorities and other preferred bodies, a residual right by which they, in applying what was described by the Minister as a "strict formula", could decide the amount that they could deduct from the receipts of the unhappy former landowner. This raises a constitutional issue of considerable importance. We believe that it is vital that the individual landowner should either have the opportunity to consent to the deduction that is made or, if he does not wish to consent to that deduction, should have the deduction made only after the assessment of tax has been made by the Board of Inland Revenue.
We wish to prevent a position arising in which the local authority is both the beneficiary of the amount of tax and also the assessor of the amount of tax. We believe it to be essential that tax assessment and tax collection should be carried out only by a body independent of the


political process and, most of all, independent of a body that may benefit from the level of tax that it has itself fixed. I know the Minister may say that there is a strict formula. He may say that, in applying the strict formula, the exempt body will be unable to have much room for latitude, but that is not right. This tax is based upon a value judgment as to the current use value. It is not based upon any clear mathematical position as to what was paid for the land, or anything of that sort. It is to be based upon a value judgment about which honest men may reasonably disagree.
The danger of the present arrangement is that a local authority, unhappily, will have a most important interest in making sure that the assessed amount of tax is large, so as to give it a large deduction and, thus, a small purchase price. This arrangements brings into consideration the important constitutional position of local authorities and, with them, exempt bodies as defined in the Bill.
Before I go on to consider their particular position it is perhaps right to reflect why it is that this institution, in which we are so proud to serve, is becoming more and more the subject of disrespect thoughout the country. I suggest that one of the reasons is that it is believed that we have taken to ourselves too many powers, and too many pretensions, to the disavantage of the ordinary citizen.
I believe the same argument applies with even greater force to local authorities. Local authorities are now the monopoly granters of planning permission. After the passage of this legislation they will become the main purchasers of development land. They already own one-third of the housing in this country. They are already substantial and resented tax gatherers, through the rating system. If we add to this the right to assess their own tax under development land tax, after they have already decided upon a process of compulsory acquisition by taking from the land owner that which is his own, we shall do irreparable damage to exempt authorities, whether statutory undertakers or local authorities. We shall find that we bring them, first, into disrespect, then into contempt, and finally into nothing less than hatred.
10.0 p.m.
If we do not adopt the new clause, we shall do serious damage to a structure of which most of us are proud. We surely all believe that it is vital that power should be disseminated away from the centre—away from Westminster. Many of us went to a magnificent and solemn ceremony this morning. It made me think of the difference between the history and culture of our country and those of France. The French Constitution is based upon centralised decision-making, with—perhaps I might be so offensive as to say—occasionally a slightly authoritarian tendency. Ours has been a different tendency, towards rugged independence and a system of provincial and region autonomy by which individuals make their own decisions and are proud, most of all, to be individuals—sometimes to be Englishmen, sometimes Welshmen, sometimes Scotsmen.
Most of all, we wish to see decision-making taken away from the centre and given to locally-elected bodies and individuals. This proposal reverses that whole trend. It gives local authorities an added and dangerous power. In a consideration whether to undertake a piece of development, the amount of tax that can be deducted will be crucial to its viability. At present, the Government are trying to impose strict cash limits on local authorities. Thus, if the borough architect or the district surveyor assesses the amount of tax inaccurately, probably someone in his office will have to be sacked, because there will not be money enough to pay the increased cost of the development and also to employ the bloke whose head is nearest the chopping block.
Important political and human considerations will be involved in deciding the amount of tax, so we say that the health of the whole structure of our local government, as well as the freedom of the individual citizen, require the House to say that any assessment for DLT should be made by an independent body—the Board of Inland Revenue—and not given to local authorities and exempt bodies who already have far too much power.

Mr. Sainsbury: We are dealing here with one of the fundamental issues of the Bill which some of us find particularly disturbing. My hon. Friend the Member


for Wolverhampton, South-West (Mr. Budgen) has drawn attention to the extent to which the new clause tries to alleviate this problem. The clause refers to
section 39 and Schedule 7".
We are all grateful for the ochre-coloured book. I am not sure of the correct description of its colour. I refer to the booklet entitled "Development Land Tax Bill Explanatory Notes" which was issued by the Board of Inland Revenue. The explanation of Clause 38 reads:
Subsection (1) Where an interest in land is disposed of to certain types of local authority, or to an "exempt body" (see subsection (8)), having compulsory acquisition powers in relation to that interest, that authority or body is to make a deduction from the consideration on account of the DLT payable in respect of that disposal.
Individuals who have their land acquired from them by a variety of bodies which have compulsory acquisition powers in respect of that land will have the compensation paid to them assessed by reference to a formula which allows the acquiring authority to deduct from the purchase price paid a sum of money calculated in accordance with a formula.
However clever, well-intentioned and ingenious the Board of Inland Revenue may be—I have no doubt that it satisfies most of those adjectives—its formulae will give rise to occasions when the sum paid is more, or on some occasions less, than the amount that should be properly paid. If the sum paid were to be more than the amount that should be properly paid, I suspect that I might—especially if I were a member of the Government—construct an argument as to how iniquitous, wrong and improper it would be for the acquiring authority to pay to the vendor a sum greater than that to which he should properly be entitled. I might persuade my hon. Friend the Member for Wolverhampton, South-West to join me in complaining about gross extravagance in the use of public money in that sums were being laid out in compensation which should not be properly laid out in compensation.
However, speaking from the Opposition Benches and bearing in mind the rights of individuals rather more than those of local authorities, I shall pass over that argument. I shall leave that to the Minister, if he is minded to accept

the new clause, because it would be wrong in our current economic circumstances to think of local authorities being required to pay sums significantly in excess of those they should properly pay for the acquisition of the land which they properly require for their purposes.
I am concerned with the reverse situation in which, as a result of the application of the formula in the Bill, a local or acquiring authority pays the purchase price to the vendor. We must remember that the vendor may not have placed his land on the market to all purchasers, one of whom may have negotiated a deal, with the result that a fair market price may be arrived at between a willing seller and a willing purchaser. The landowner's land is being acquired from him, on many occasions against his will. The tax that he is being required to pay, being calculated on a formula, may leave him with a lesser sum in respect of his asset—it may be his only marketable asset—than the money to which he is entitled.

Mr. Fairbairn: It may leave him not only with a lesser sum but with a lesser asset as well. He would have had every right to resist the deprivation of that asset, but he may be deprived of it compulsorily and still have to pay tax.

Mr. Sainsbury: I take my hon. and learned Friend's point entirely. The person concerned is not a willing vendor. He is being deprived of an asset which he did not want to lose in the first place and he is being left with a lesser amount of compensation than that to which he would be properly entitled under this legislation. He would have a lesser sum of money in his possession than that to which he was properly entitled. That is because the Bill, without the new clause, allows the acquiring authority to take the asset from him without there having been a proper assessment to tax.
The Minister is far more learned in the intricacies of the tax law than I am. I hope that he will therefore draw the attention of the House to the occasions when the Revenue, for other forms of tax, is entitled to make an assessment in default of the full information that it would require to make a proper assessment. I understand that the Revenue has powers to make assessments in default of the provision by the taxpayer of the


necessary information that would enable it to make a fair and correct assessment. That, however, is not the situation in this legislation.
However anxious and willing the vendor might be to provide to the Revenue—the mandarins of Middlesbrough, or whatever we shall call them when the Development Land Tax Office, if it is to come into being, is fully established—or to the acquiring authority, whichever it may be, all the information and data that could possibly be required to make a proper assessment, it will be of no avail. Unless we accept the new clause, he will still have that asset acquired from him at a price calculated on the basis of a formula, not on the basis of a proper assessment of tax. It is for that reason that I hope that the new clause, which is commendably short compared with the standard of other new clauses we have discussed, will be accepted.
The clause provides:
Except by the consent of the chargeable person—
—my hon. Friend the Member for Wolverhampton, South-West does not suggest that it should never be done—
and of the relevant creditor".
I need not detain the House at this stage by enlarging upon the details of what, in Clause 46(2), turns out to be a "relevant creditor". Indeed, if I tried to do so I might not only stray from the bounds of order but get slightly lost in the complexities of identifying "relevant creditor".
10.15 p.m.
The House should direct its attention to the chargeable person—the vendor. The clause states:
Except by the consent of the chargeable person … unless and until the Board have issued a notice that the material disposal does not give rise to any liability for development land tax".
If that is so, we have no problem. If the board can issue such notice, a chargeable person has nothing to worry about. But unless that condition is satisfied and the board has issued a notice that there is no liability any DLT, it must produce a notice of assessment to tax, unless the chargeable person is prepared to waive that requirement. This implies that the

chargeable person shall have the right to receive the correctly-assessed sum of money, the proper compensation, the proper payment for his asset, assessed in conformity with the provisions of the Bill and with the rate of tax which is then in force—either that which is now in the Bill or any other which may be introduced in any of the numerous Finance Bills to which we appear to be subject these days.
Unless and until that assessment has been made, the transaction cannot be proceeded with and the acquiring body shall not
have any right of entry (by virtue of a compulsory purchase order or otherwise) to enter on or take possession of the land the subject of the disposal.
That seems to be a concept which should commend itself to all right hon. and hon. Members on both sides of the House. I do not suppose that the ancient tradition of an Englishman's home being his castle would entirely commend itself to the Minister, but I know that my hon. and learned Friend has a special interest in a Scotsman's home being his castle.

Mr. Fairbairn: I should declare an interest. This Scotsman's home is his castle, and I find offensive the concept that an Englishman's home should be his castle and a Scotsman's home should not be, particularly when Scottish castles are their homes.

Mr. Sainsbury: My hon. and learned Friend may recall that some Englishmen's homes were castles because of the depredations they suffered over the border from the ancestors of my hon. and learned Friend, which explains the large number of castles in the northern parts of England.
However, we are drifting a little from the point. Surely it is a proper concept that somebody who is having to pay a tax—indirectly, I agree, through the process of the acquisition of land—and who is perfectly prepared, willing and able to make available to the proper authorities all the information that they require so that that tax shall be properly assessed, should not be required to pay that tax until the assessment is made. In effect, that is what the new clause means. That is why I shall strongly support my right hon. and hon. Friends in pressing it.

Mr. Mayhew: I should be very glad not to have to support the clause for one reason at least, that coming to it as one who did not have to undergo the penance of sitting on the Standing Committee I find it so complex in its draftsmanship that I cannot make head or tail of it. But, having heard the speech of my hon. Friend the Member for Hove (Mr. Sainsbury), it seems to me that the provisions of the Bill as drafted are so offensive to any considerations of equity, justice or fair dealing that one must be obliged to support the clause, even one drafted with such complexity, not to say obscurity, as this—no doubt necessarily, and I make no criticism of it, for it would be important to do so.
I want to make sure that I have correctly grasped the point that my hon. Friend is making. I find it difficult to believe that even a Government with the record of the present Government could seriously suppose that taxation can properly be levied, or even practicably be levied, on the principles that I think I have understood my hon. Friend to outline.
As I understand the position, of the clause is not introduced to mitigate the effects of the Bill as drafted, there will be occasions when, by the rigid application of a formula, a property owner who does not wish to sell his property but is obliged to do so by the operation of another part of the Bill, or perhaps some other legislation, will lose a larger sum than the value of the property itself. He will not be able to retain his own property, and he will be taxed by the application of this formula to a greater extent than the sum total of the compensation he is entitled to receive by virtue of the acquisition of his property.
That was what I understood my hon. Friend to be saying. If that is so, it cannot be justified in any way. If I have got it wrong I should be grateful to be corrected, but if that is, at any rate in outline, the nature of the clause in the Bill as drafted, it could not conceivably be justified.
Let us suppose that it were to be brought within the jurisdiction of international law. Let us suppose that the present Government were nationalising, for example, an asset belonging to a

foreign proprietor but located within the United Kingdom. International law would pronounce unlawful a procedure which resulted in the failure to compensate to the full value of the property thus acquired, whatever the property in question might be. It is a well established principle of international law that if one is going to expropriate from a foreign owner on must compensate him properly; that is, to the full extent of the value of the property one is taking. That is only because such a result is just and fair.
We recognise that the complexities of life today are such that compulsory purchase orders are justifiable in certain circumstances. However, how can it conceivably be said to be fair that someone who is obliged to part with his property shall do so only on the terms that he is taxed upon the compensation he receives and taxed on such a scale that he is left with only a negative—and that not only is the compensation taken away but he is left with less.

Mr. Fairbairn: With great respect to my hon. and learned Friend, I think he is putting the matter too wide. It is not that a person is obliged to part with his property; he is obliged to part with an interest in his property, under the clause in question—nothing more.

Mr. Mayhew: I am grateful to my hon. and learned Friend for the benefit of his closer acquaintance with the Bill, derived from membership of the Committee. That makes the matter all the worse.
I hope that the Minister will be able to assure us that in some way or other my hon. Friend the Member for Hove, my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) and I have got it wrong and that the Government do not intend that any such result shall flow from the Bill as drafted. I hope that the Minister will be able to say that somehow this interpretation has crept in by some mistake. If, unhappily, our interpretation is correct, I hope that the Minister will explain—it will need careful explanation—how this can conceivably be justified by any considerations of equity or justice. If the Minister does that, the House will listen with great attention. If that cannot be done, however, I hope that the clause


will be accepted by the House, and by a majority of a size that will indicate the disgust that the House feels for legislation which could lead to consequences twice as unjust as those that my hon. Friends have indicated.
As the Minister knows, I find this section of the Bill offensive for a variety of reasons but mainly because it offends against several principles of natural justice, which I presume still apply in England as they do in Scotland. The first is that the assessing authority is judex in sua re. It is judge in its own cause, it makes its own assesment, it makes its own principles, it decides upon the interpretation of its own act in its own interest. If it admits that it gets it wrong, although there is no appeal it will hand back the difference of its error.
Persons should not be made liable to tax on the basis of a disposal of an interest in land which might only be small. It is wrong that a person should be made liable to tax by an authority which judges what that tax shall be and the tax is then in the hands of that authority. That is authoritarianism. It is contrary to natural justice and contrary to the principles upon which the Minister, I assume, was educated in the law of England.
The clause seeks to eradicate those fundamental evils. I expect that the Minister will tell us—and I can hear his speech before he makes it—that some people might get away with it, that loopholes would be made and that terrible things would happen. Two principles of natural justice are offended, yet a party which pretends to be interested in justice allows this to occur when it could be cured by the clause. I hope that the clause will receive Government support.

Mr. Arthur Jones: I am concerned for the relationship involved in the Government proposal between the local authority, which will implement the obligations under the Bill, and the local community. I entirely support the terms of the clause where it says:
nor shall the acquiring body have any right of entry".
Under the Land Compensation Act a significant payment was required before a right of entry was given. But under

the Bill there is no obligation to make any payment. It is almost confiscatory in its significance for someone who has a substantial interest in land. The local authority will be hesitant and reluctant to implement an obligation which means that it can enter a property without any payment.
Many hon. Members have served in local government, and one can envisage a situation where a local authority, in furtherance of its obligations under the Bill and of its local policies—particularly in planning—wishes to acquire an area of land or a property in an area which is right for development and yet the Government are not prepared to require that the local authority shall make a significant payment on account of the cost of acquisition. If they would accept the terms of the clause the acquiring body would not have a right of entry. If it were tied up with the Land Compensation Act, it would be a much more reasonable proposition.
I am concerned about the relationship between the elected members of the local authorities which will be responsible for the administration and the owners of property and the local community generally. The effect on that relationship is a dangerous feature of the Bill.

10.30 p.m.

Mr. Denzil Davies: I should like to explain briefly, because some hon. Members did not have the privilege and joy of serving on the Committee, how the net-of-tax arrangements work. The hon. and learned Member for Royal Tunbridge Wells (Mr. Mayhew) did not seem to understand the formula deduction, and I make no criticism of him for that. It is a provisional deduction of tax, not the final payment. That is determined between the individual and the Inland Revenue. The final liability may be different: the formula deduction is merely a convenient way of deducting an amount of tax. There is a limit of 50 per cent. of the consideration in any case.

Mr. Mayhew: Must not the tax be paid in the meantime on the basis of the application of the formula? Is not one kept out of one's money for a significant time?

Mr. Davies: Yes, but that happens to other people; for example, those who suffer deductions from their income for


income tax purposes. My point was that it was not the final assessment, which is determined between the Inland Revenue and the individual.

Mr. Fairbairn: There is a slight distinction. One can appeal against an income tax or surtax assessment. There is no appeal formula here.

Mr. Davies: There is. I shall come to the point about appeal in a moment. There is an appeal against PAYE, but not before the tax is deducted. Very often with PAYE the final payment is not different, but sometimes it might be.
The main point which has been made is that the local authority might impose on the individual a formula deduction and will not give him the opportunity of challenging it. But there are some voluntary sales to local authorities by individuals. Before the sale, the individual can obtain from the Inland Revenue a provisional assessment of tax. The Inland Revenue communicates that provisional assessment, based on the details of the proposed sale, to the local authority, which must deduct tax equivalent to that provisional assessment. That is not determined by the local authority and is not within its discretion. An alternative would be for the individual to agree with the local authority to a deduction.
It is only when neither of those procedures is followed that the formula deduction come into being. The protection for the individual is that before any conclusion is reached he can agree with the Inland Revenue a provisional assessment which will be imposed on the local authority. It will have to deduct tax according to that assessment. Final liability will be determined later, and the figures may be different.
The question of compulsory purchase was raised in Committee, especially by the right hon. Member for Crosby (Mr. Page). He was concerned that the compulsory purchase procedures might not be of a kind that would enable the taxpayer to obtain from the Inland Revenue a provisional assessment. The fear expressed in Committee was that the local authority, instead of allowing the vendor sufficient time to agree a specific deduction with the DLT office, would enter on the land and acquire it compulsorily, thus

forcing his hand. If the local authority were to do that—this takes up the point raised by the hon. Member for Daventry (Mr. Jones)—it would be faced with having to make a 90 per cent. advance payment of compensation under Section 32 of the Land Compensation Act 1961 with interest from the date of entry. There is that sanction on local authorities.
I accepted in Committee, and I accept now, that it would be serious if local authorities were to abuse the compulsory purchase powers so as to deny to the individual the opportunity to agree a deduction with the Inland Revenue. I do not believe that will happen, but if it appears that authorities are trying to use the compulsory purchase procedures for that purpose, we shall consider it to be a serious matter.
We could amend the compulsory purchase procedures to prevent abuse by the authorities if there were evidence of abuse. They could be amended, although that would cause greater delay. If the authorities were to abuse the procedures by preventing a taxpayer from going to the Inland Revenue and obtaining a provisional assessment, we should consider amending the procedures to prevent that happening. That would be the right way of dealing with the matter, not as is suggested in the clause.

Mr. Graham Page: This is not the right way to treat the House. Surely it is not right to say, "Some danger could arise from the clause. If it does, we shall introduce new legislation." The clause would avoid any such danger, and I ask the House to accept it.
The clause accepts that there may be net-of-tax purchases. There may be, but they will not take place unless there has been a proper assessment by the Inland Revenue, not an assessment by the local authority. The formula in Schedule 7 leaves the local authority to assess that formula, which is based on an estimate by the local authority of the current use value of the property.

Mr. Fairbairn: The Minister said that he would deal with the fact that there is a system of appeal, but I did not hear him deal with it. I hope that my right hon. Friend will emphasise that there is no system of appeal.

Mr. Page: There is no system of appeal against the provisional assessment or against the formula deduction. Eventually there is an appeal against final assessment on the chargeable person. But that person is put in an extremely difficult position if the formula is applied and deduction is made, assessment being made by the local authority even on the basis of the formula, because the formula is based on an estimate made by the local authority.

Mr. Denzil Davies: I thought I made it clear that as regards voluntary sales the individual is protected because he can agree a provisional assessment with the Inland Revenue. There is no question of a formula deduction being imposed upon him. I accepted that local authorities might seek to abuse the compulsory purchase procedures, but I do not think that will happen. If that were to be the case, we should bring in amending legislation.

Mr. Page: If the hon. Gentleman would accept the clause, there would be no danger of abuse by the local authorities. The simple formula that the clause provides is that deduction is made either by the consent of the person who has to pay or by assessment on him of the amount he has to pay. The Minister said that as regards voluntary sales the chargeable person can—I quote his words—go along to the Inland Revenue. I hesitate to repeat what I said in Committee, but I criticised the Minister for saying that the chargeable person could go along to the mandarins in Middlesbrough and obtain an immediate provisional assessment. Of course that cannot happen. That is why we framed the clause as it appears before the House.

Mr. Budgen: rose—

Mr. Page: The clause provides that if a person selling to the local authority wants a quick completion of his purchase, he can consent to the local authority making a deduction. This is the right way to deal with it. He can do that now. The clause recognises it. But it says that the local authority is not to take any steps to prevent such an agreement or to prevent a proper assessment of the chargeable person.

Mr. Budgen: Will my right hon. Friend take up with the Minister the point that many injustices occur when there are voluntary sales? This is an extremely complex, and, therefore, very expensive, procedure for the small landowner, whose land is often taken voluntarily but with the threat of compulsory acquisition as a back-up. Therefore, there will be injustices, because many small landowners will not wish to avail themselves of their full right.

Mr. Page: In a voluntary sale, where the purchaser has compulsory purchase powers, the purchaser always has the upper hand, and those powers can be used. The Minister says that he does not think local authorities will abuse the powers. Although I have criticised this net-of-tax purchase procedure throughout, I have recognised it in the clause and merely put in the precaution that it shall not be used unless the chargeable person agrees, or unless he has been properly assessed.
I am surprised that the Minister did not rise at once and say that he would accept the clause. Since he has not done so, I hope that we can force him to accept it.

Question put, That the clause be read a Second time:—

The House divided: Ayes 272, Noes 281.

Division No. 194.]
AYES
[10.43 p.m.


Adley, Robert
Blaker, Peter
Bulmer, Esmond


Aitken, Jonathan
Body, Richard
Burden, F. A.


Alison, Michael
Boscawen, Hon Robert
Butler, Adam (Bosworth)


Amery, Rt Hon Julian
Bottomley, Peter
Carlisle, Mark


Arnold, Tom
Bowden, A. (Brighton, Kemptown)
Carson, John


Atkins, Rt Hon H. (Spelthorne)
Boyson, Dr Rhodes (Brent)
Chalker, Mrs Lynda


Awdry, Daniel
Bradford, Rev Robert
Churchill, W. S.


Baker, Kenneth
Braine, Sir Bernard
Clark, Alan (Plymouth, Sutton)


Banks, Robert
Brittan, Leon
Clark, William (Croydon S)


Beith, A. J.
Brocklebank-Fowler, C.
Clarke, Kenneth (Rushcliffe)


Bell, Ronald
Brotherton, Michael
Clegg, Walter


Bennett, Dr Reginald (Fareham)
Brown, Sir Edward (Bath)
Cockcroft, John


Benyon, W.
Bryan, Sir Paul
Cooke, Robert (Bristol W)


Berry, Hon Anthony
Buchanan-Smith, Alick
Cope, John


Biffen, John
Buck, Antony
Cordle, John H.


Biggs-Davison, John
Budgen, Nick
Cormack, Patrick




Corrie, John
Jopling, Michael
Pym, Rt Hon Francis


Critchley, Julian
Joseph, Rt Hon Sir Keith
Raison, Timothy


Crouch, David
Kaberry, Sir Donald
Rathbone, Tim


Crowder, F. P.
Kellett-Bowman, Mrs Elaine
Rawlinson, Rt Hon Sir Peter


Davies, Rt Hon J. (Knutsford)
Kershaw, Anthony
Rees, Peter (Dover &amp; Deal)


Dean, Paul (N Somerset)
Kimball, Marcus
Reid, George


Dodsworth, Geoffrey
King, Evelyn (South Dorset)
Renton, Rt Hon Sir D. (Hunts)


Douglas-Hamilton, Lord James
King, Tom (Bridgwater)
Renton, Tim (Mid-Sussex)


Drayson, Burnaby
Kitson, Sir Timothy
Ridley, Hon Nicholas


du Cann, Rt Hon Edward
Knight, Mrs Jill
Ridsdale, Julian


Dunlop, John
Knox, David
Rifkind, Malcolm


Durant, Tony
Lamont, Norman
Rippon, Rt. Hon Geoffrey


Dykes, Hugh
Lane, David
Roberts, Wyn (Conway)


Edwards, Nicholas (Pembroke)
Langford-Holt, Sir John
Rodgers, Sir John (Sevenoaks)


Elliott, Sir William
Lawrence, Ivan
Ross, Stephen (Isle of Wight)


Emery, Peter
Lawson, Nigel
Ross, William (Londonderry)


Evans, Gwynfor (Carmarthen)
Le Marchant, Spencer
Rossi, Hugh (Hornsey)


Eyre, Reginald
Lester, Jim (Beeston)
Rost, Peter (SE Derbyshire)


Fairbairn, Nicholas
Lewis, Kenneth (Rutland)
Royle, Sir Anthony


Fairgrieve, Russell
Lloyd, Ian
Sainsbury, Tim


Farr, John
Loveridge, John
St. John-Stevas, Norman


Fell, Anthony
Luce, Richard
Scott, Nicholas


Fisher, Sir Nigel
McAdden, Sir Stephen
Scott-Hopkins, James


Fletcher-Cooke, Charles
McCrindle Robert
Shaw, Giles (Pudsey)


Fookes, Miss Janet
McCusker, H.
Shelton, William (Streatham)


Forman, Nigel
Macfarlane, Neil
Shepherd, Colin


Fox, Marcus
MacGregor, John
Shersby, Michael


Fraser, Rt Hon H. (Stafford &amp; St)
Macmillan, Rt Hon M. (Farnham)
Silvester, Fred


Freud, Clement
McNair-Wilson, M. (Newbury)
Sims, Roger


Fry, Peter
McNair-Wilson, P. (New Forest)
Sinclair, Sir George


Galbraith, Hon. T. G. D.
Madel, David
Skeet, T. H. H.


Gardiner, George (Reigate)
Marshall, Michael (Arundel)
Smith, Cyril (Rochdale)


Gardner, Edward (S Fylde)
Marten, Neil
Smith, Dudley (Warwick)


Gilmour, Rt Hon Ian (Chesham)
Mates, Michael
Spence, John


Gilmour, Sir John (East Fife)
Maude, Angus
Spicer, Jim (W Dorset)


Glyn, Dr Alan
Maudling, Rt Hon Reginald
Spicer, Michael (S Worcester)


Goodhart, Philip
Maxwell-Hyslop, Robin
Sproat, Iain


Goodhew, Victor
Mayhew, Patrick
Stainton, Keith


Gorst, John
Meyer, Sir Anthony
Stanbrook, Ivor


Gow, Ian (Eastbourne)
Miller, Hal (Bromsgrove)
Stanley, John


Gower, Sir Raymond (Barry)
Mills, Peter
Steen, Anthony (Wavertree)


Grant, Anthony (Harrow C)
Miscampbell, Norman
Stewart, Ian (Hitchin)


Gray, Hamish
Mitchell, David (Basingstoke)
Stokes, John


Griffiths, Eldon
Moate, Roger
Stradling Thomas, J.


Grimond, Rt Hon J.
Molyneaux, James
Tapsell, Peter


Grist, Ian
Monro, Hector
Taylor, R. (Croydon NW)


Grylls, Michael
Montgomery, Fergus
Taylor, Teddy (Cathcart)


Hall, Sir John
Moore, John (Croydon C)
Tebbit, Norman


Hall-Davis, A. G. F.
More, Jasper (Ludlow)
Temple-Morris, Peter


Hamilton, Michael (Salisbury)
Morgan, Geraint
Thomas, Rt Hon P. (Hendon S)


Hampson, Dr Keith
Morgan-Giles, Rear-Admiral
Townsend, Cyril D.


Hannam, John
Morris, Michael (Northampton S)
Trotter, Neville


Harvie Anderson, Rt Hon Miss
Morrison, Charles (Devizes)
Tugendhat, Christopher


Hastings, Stephen

van Straubenzee, W. R.


Havers, Sir Michael
Morrison, Hon Peter (Chester)
Vaughan, Dr Gerard


Hawkins, Paul
Mudd, David
Viggers, Peter


Hayhoe, Barney
Neave, Airey
Wakeham, John


Heseltine, Michael
Nelson, Anthony
Walder, David (Clitheroe)


Hicks, Robert
Neubert, Michael
Walker, Rt Hon P. (Worcester)


Higgins, Terence L.
Newton, Tony
Walker-Smith, Rt Hon Sir Derek


Holland, Philip
Normanton, Tom
Wall, Patrick


Hooson, Emlyn
Nott, John
Walters, Dennis


Hordern, Peter
Onslow, Cranley
Watt, Hamish


Howe, Rt Hon Sir Geoffrey
Oppenheim, Mrs Sally
Weatherill, Bernard


Howell, David (Guildford)
Osborn, John
Wells, John


Howell, Ralph (North Norfolk)
Page, John (Harrow West)
Whitelaw, Rt Hon William


Howells, Geraint (Cardigan)
Page, Rt Hon R. Graham (Crosby)
Wiggin, Jerry


Hunt, David (Wirral)
Parkinson, Cecil
Wigley, Dafydd


Hunt, John
Pattie, Geoffrey
Winterton, Nicholas


Hurd, Douglas
Penhaligon, David
Wood, Rt Hon Richard


Hutchison, Michael Clark
Percival, Ian
Young, Sir G. (Ealing, Acton)


Irving, Charles (Cheltenham)
Peyton, Rt Hon John
Younger, Hon George


James, David
Pink, R. Bonner



Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Powell, Rt Hon J. Enoch
TELLERS FOR THE AYES:


Jessel, Toby
Price, David (Eastleigh)
Mr. Michael Roberts and


Johnson Smith, G. (E Grinstead)
Prior, Rt Hon James
Mr. Carol Mather.


Jones, Arthur (Daventry)






NOES


Abse, Leo
Ashton, Joe
Barnett, Rt Hon Joel (Heywood)


Allaun, Frank
Atkins, Ronald (Preston N)
Bates, Alf


Anderson, Donald
Atkinson, Norman
Bean, R. E.


Archer, Peter
Bagier, Gordon A. T.
Benn, Rt Hon Anthony Wedgwood


Armstrong, Ernest
Barnett, Guy (Greenwich)
Bennett, Andrew (Stockport N)







Bidwell, Sydney
Hardy, Peter
Noble, Mike


Bishop, E. S.
Harper, Joseph
Oakes, Gordon


Blenkinsop, Arthur
Harrison, Walter (Wakefield)
Ogden, Eric


Boardman, H.
Hart, Rt Hon Judith
O'Halloran, Michael


Booth, Rt Hon Albert
Hattersley, Rt Hon Roy
Orbach, Maurice


Bottomley, Rt Hon Arthur
Hatton, Frank
Orme, Rt Hon Stanley


Boyden, James (Bish Auck)
Hayman, Mrs Helene
Ovenden, John


Bradley, Tom
Heffer, Eric S.
Owen, Dr David


Bray, Dr Jeremy
Hooley, Frank
Palmer, Arthur


Brown, Hugh D. (Provan)
Howell, Rt Hon Denis
Park, George


Brown, Robert C. (Newcastle W)
Hoyle, Doug (Nelson)
Parker, John


Brown, Ronald (Hackney S)
Huckfield, Les
Parry, Robert


Buchan, Norman
Hughes, Rt Hon C. (Anglesey)
Pavitt, Laurie


Buchanan, Richard
Hughes, Mark (Durham)
Peart, Rt Hon Fred


Butler, Mrs Joyce (Wood Green)
Hughes, Robert (Aberdeen N)
Pendry, Tom


Callaghan, Jim (Middleton &amp; P)
Hughes, Roy (Newport)
Perry, Ernest


Campbell, Ian
Hunter, Adam
Phipps, Dr Colin


Canavan, Dennis
Irvine, Rt Hon Sir A. (Edge Hill)
Prentice, Rt Hon Reg


Cant, R. B.
Irving, Rt Hon S. (Dartford)
Prescott, John


Carmichael, Neil
Jaskson, Colin (Brighouse)
Price, C. (Lewisham W)


Carter, Ray
Jackson, Miss Margaret (Lincoln)
Price, William (Rugby)


Carter-Jones, Lewis
Janner, Greville
Radice, Giles


Cartwright, John
Jay, Rt Hon Douglas
Rees, Rt Hon Merlyn (Leeds S)


Clemitson, Ivor
Jeger, Mrs Lena
Richardson, Miss Jo


Cocks, Michael (Bristol S)
Jenkins, Hugh (Putney)
Roberts, Albert (Normanton)


Cohen, Stanley
John, Brynmor
Roberts, Gwilym (Cannock)


Colquhoun, Ms Maureen
Johnson, James (Hull West)
Robinson, Geoffrey


Cook, Robin F. (Edin C)
Johnson, Walter (Derby S)
Roderick, Caerwyn


Corbett, Robin
Jones, Dan (Burnley) 
Rodgers, George (Chorley)


Cox, Thomas (Tooting)
Judd, Frank
Rodgers, William (Stockton)


Craigen, J. M. (Maryhill)
Kaufman, Gerald
Rooker, J. W.


Cronin, John
Kelley, Richard
Ross, Rt. Hon W. (Kilmarnock)


Cryer, Bob
Kerr, Russell
Rowlands, Ted


Cunningham, G. (Islington S)
Kilroy-Silk, Robert
Sandelson, Neville


Cunningham, Dr J. (Whiteh)
Kinnock, Neil
Sedgemore, Brian


Dalyell, Tam
Lambie, David
Selby, Harry


Davidson, Arthur
Lamborn, Harry
Shaw, Arnold (Ilford South)


Davies, Bryan (Enfield N)
Lamond, James
Sheldon, Robert (Ashton-u-Lyne)


Davies, Denzil (Llanelli)
Latham, Arthur (Paddington)
Shore, Rt Hon Peter


Davies, Ifor (Gower)
Leadbitter, Ted
Short, Rt Hon E. (Newcastle C) 


Davis, Clinton (Hackney C)
Lee, John
Short, Mrs Renée (Wolv NE)


Deakins, Eric
Lestor, Miss Joan (Eton &amp; Slough)
Silkin, Rt Hon John (Deptford)


Dean, Joseph (Leeds West)
Lever, Rt Hon Harold
Silkin, Rt Hon S. C. (Dulwich)


de Freitas, Rt Hon Sir Geoffrey
Lewis, Ron (Carlisle)
Sillars, James


Dell, Rt Hon Edmund
Lipton, Marcus
Silverman, Julius


Dempsey, James
Litterick, Tom
Skinner, Dennis


Doig, Peter
Lomas, Kenneth
Small, William


Dormand, J. D.
Loyden, Eddie
Smith, John (N Lanarkshire)


Douglas-Mann, Bruce
Luard, Evan
Snape, Peter


Dunn, James A.
Lyons, Edward (Bradford W)
Spearing, Nigel


Dunnett, Jack
Mabon, Dr J. Dickson
Stallard, A. W.


Dunwoody, Mrs Gwyneth
McCartney, Hugh
Stewart, Rt Hon M. (Fulham)


Eadie, Alex
McElhone, Frank
Stoddart, David


Edge, Geoff
MacFarquhar, Roderick
Strang, Gavin


Edwards, Robert (Wolv SE)
McGuire, Michael (Ince)
Strauss, Rt Hon G. R.


Ellis, John (Brigg &amp; Scun)
Mackenzie, Gregor
Summerskill, Hon Dr Shirley


Ellis, Tom (Wrexham)
Mackintosh, John P.
Swain, Thomas


English, Michael
Maclennan, Robert
Thomas, Jeffrey (Abertillery)


Ennals, David
McMillan, Tom (Glasgow C)
Thomas, Mike (Newcastle E)


Evans, Fred (Caerphilly)
McNamara, Kevin
Thomas, Ron (Bristol NW)


Evans, Ioan (Aberdare)
Madden, Max
Thorne, Stan (Preston South)


Ewing, Harry (Stirling)
Magee, Bryan
Tierney, Sydney


Faulds, Andrew
Mahon, Simon
Tinn, James


Fernyhough, Rt Hon E.
Mallalleu, J. P. W.
Tomlinson, John


Flannery, Martin
Marks, Kenneth
Tomney, Frank


Fletcher, Raymond (Ilkeston)
Marquand, David
Torney, Tom


Fletcher, Ted (Darlington)
Marshall, Dr Edmund (Goole)
Tuck, Raphael


Foot, Rt Hon Michael
Marshall, Jim (Leicester S)
Urwin, T. W.


Ford, Ben
Maynard, Miss Joan
Varley, Rt Hon Eric G.


Forrester, John
Meacher, Michael
Wainwright, Edwin (Dearne V)


Fowler, Gerald (The Wrekin)
Mellish, Rt Hon Robert
Walden, Brian (B'ham, L'dvw'd)


Fraser, John (Lambeth, N'w'd)
Mendelson, John
Walker, Harold (Doncaster)


Freeson, Reginald
Mikardo, Ian
Walker, Terry (Kingswood)


Garrett, John (Norwich S)
Millan, Bruce
Ward, Michael


Garrett, W. E. (Wallsend)
Miller, Mrs Millie (Ilford N)
Watkins, David


George, Bruce
Mitchell, R. C. (Soton, Itchen)
Watkinson, John


Gilbert, Dr John
Molloy, William
Weetch, Ken


Ginsburg, David
Moonman, Eric
Weitzman, David


Golding, John
Morris, Alfred (Wythenshawe)
Wellbeloved, James


Gould, Bryan
Morris, Charles R. (Openshaw)
White, Frank R. (Bury)


Gourlay, Harry
Morris, Rt Hon J. (Aberavon)
White, James (Pollok)


Graham, Ted
Moyle, Roland
Whitehead, Phillip


Grant, George (Morpeth)
Mulley, Rt Hon Frederick
Whitlock, William


Grant, John (Islington C)
Murray, Rt Hon Ronald King
Willey, Rt Hon Frederick


Grocott, Bruce
Newens, Stanley
Williams, Alan (Swansea W)







Williams, Alan Lee (Hornch'ch)
Wilson, William (Coventry SE)
Young, David (Bolton E)


Williams, Rt Hon Shirley (Hertford)
Wise, Mrs Audrey



Williams, Sir Thomas
Woodall, Alec
TELLERS FOR THE NOES:


Wilson, Alexander (Hamilton)
Woof, Robert
Mr. James Hamilton and


Wilson, Rt Hon H. (Huyton)
Wrigglesworth, Ian
Mr. Donald Coleman.

Question accordingly negatived.

Clause 2

DEEMED DISPOSAL AT START OF MATERIAL DEVELOPMENT

Mr. Denzil Davies: I beg to move Amendment No. 2, in page 2, line 10 leave out from "time" to "and" in line 11.
The purpose of the amendment is to reverse Opposition Amendment No. 29 which was carried against the Government in Standing Committee. The effect of that amendment was to reduce the deemed disposal consideration by an amount equal to what would have been the incidental cost had there been an actual sale. The Government amendment restores the original position, in which the interest concerned shall be deemed to have been disposed of for a consideration equal to market value without allowance for purely notional expenses.
The Opposition carried an amendment in Committee which would have provided that costs which had not been incurred on the deemed disposal and reacquisition would have been allowable in computing the tax at that point. Although there would not have been a conveyance of the land there was to be a deeming provision so that the costs of that conveyance would have been deducted from the calculation of tax. This is not the intention of the legislation. The amendment would often give the taxpayer a double relief because on eventual sale he would get the costs again on that conveyance but he would not pay the tax twice and would only pay the extra amount of tax on Development value over and above the value at the time of deemed disposal.
If the amendment were to remain we would be giving double relief in respect of costs which were not incurred. I therefore ask the House to reverse the Committee's decision.

Mr. Graham Page: I should have thought that the Minister would take his defeat graciously and not try to reinstate in the Bill the subject of a Committee

defeat. If there is to be deemed disposal there should be deemed costs relative to that disposal so that we get the true figure. I strongly object to the Government steam-rollering out of the Bill what was put in by the Committee. I hope that my hon. Friends will support me in opposing the Government amendment.

11 p.m.

Mr. Ridley: I object to the treatment being meted out to the Minister by the Government Front Bench. He has been here for seven hours today—following a seven-hour stint yesterday—without relief or assistance from senior colleagues. He has had to defend the Government's lousy proposals single-handed.
The last time I raised this matter, I said the Minister had had no food, water or rest. He replied that he had some water available, but I see that even the decanter which held the water is now empty. By the way, the decanter is not marked to show hiw much water it contained in accordance with the resolution of the House earlier this week.

Mr. Budgen: Is my hon. Friend aware that if the Minister were an animal he would not be allowed to travel on the railways in the conditions in which he is now working?

Mr. Ridley: When I see the stranded whales who have come to support the Minister with their presence, if not their voices, I feel that the animal analogy used by my Friend is very apt. Certainly if the Minister were a lorry driver, he would by now have driven more miles than would be lawful and would be allowed to drive the Bill into the night.
Our sympathy is entirely with the Minister, we feel he has been badly treated. if there is another Minister within earshot who understands the Bill, I appeal to him to relieve the Minister of State and let him get a square meal. He needs some beans on toast. He cannot be expected to go on defending the Government amendment after amendment, day after day and night after night. If there needs to be a by-election


in the Minister's constituency shortly—which is the last thing we want—it will be entirely the fault of the Government.
The Minister is losing his grip due to extreme fatigue. His attempt to delete an amendment passed in Committee is a mistake. If we are to have a deemed disposal, we should surely have deemed costs to be chargeable against tax. I hate the word "deemed" in legislation. There should be no "deemed" anything for tax purposes. However, if it is to be fair for the Inland Revenue to deem that a gain or profit has been made, it

must be fair for the taxpayer to deem that expenses have been incurred. In many cases they will have been incurred.

In view of the Committee's decision and the obvious wish of the House to have the amendment retained in the Bill, I hope the Minister will think again before creating this injustice for the taxpayer.

Question put, That the amendment be made:—

The House divided: Ayes 288, Noes 257.

Division No. 195.]
AYES
[11.04 p.m.


Abse, Leo
de Freitas, Rt Hon Sir Geoffrey
Hughes, Robert (Aberdeen N)


Allaun, Frank
Dell, Rt Hon Edmund
Hughes, Roy (Newport)


Anderson, Donald
Dempsey, James
Hunter, Adam


Archer, Peter
Doig, Peter
Irvine, Rt Hon Sir A. (Edge Hill)


Armstrong, Ernest
Dormand, J. D.
Irving, Rt Hon S. (Dartford)


Ashton, Joe
Douglas-Mann, Bruce
Jaskson, Colin (Brighouse)


Atkins, Ronald (Preston N)
Dunn, James A.
Jackson, Miss Margaret (Lincoln)


Atkinson, Norman
Dunnett, Jack
Janner, Greville


Bagier, Gordon A. T.
Dunwoody, Mrs Gwyneth
Jay, Rt Hon Douglas


Barnett, Guy (Greenwich)
Eadie, Alex
Jeger, Mrs Lena


Barnett, Rt Hon Joel (Heywood)
Edge, Geoff
Jenkins, Hugh (Putney)


Bates, Alf
Edwards, Robert (Wolv SE)
John, Brynmor


Bean, R. E.
Ellis, John (Brigg &amp; Scun)
Johnson, James (Hull West)


Beith, A. J.
Ellis, Tom (Wrexham)
Johnson, Walter (Derby S)


Benn, Rt Hon Anthony Wedgwood
English, Michael
Jones, Dan (Burnley)


Bennett, Andrew (Stockport N)
Ennals, David
Judd, Frank


Bidwell, Sydney
Evans, Fred (Caerphilly)
Kaufman, Gerald


Bishop, E. S.
Evans, Ioan (Aberdare)
Kelley, Richard


Blenkinsop, Arthur
Ewing, Harry (Stirling)
Kerr, Russell


Boardman, H.
Faulds, Andrew
Kilroy-Silk, Robert


Booth, Rt Hon Albert
Fernyhough, Rt Hon E.
Kinnock, Neil


Bottomley, Rt Hon Arthur
Flannery, Martin
Lambie, David


Boyden, James (Bish Auck)
Fletcher, Raymond (Ilkeston)
Lamborn, Harry


Bradley, Tom
Fletcher, Ted (Darlington)
Lamond, James


Bray, Dr Jeremy
Foot, Rt Hon Michael
Latham, Arthur (Paddington)


Brown, Hugh D. (Provan)
Ford, Ben
Leadbitter, Ted


Brown, Robert C. (Newcastle W)
Forrester, John
Lee, John


Brown, Ronald (Hackney S)
Fowler, Gerald (The Wrekin)
Lestor, Miss Joan (Eton &amp; Slough)


Buchan, Norman
Fraser, John (Lambeth, N'w'd)
Lever, Rt Hon Harold


Buchanan, Richard
Freeson, Reginald
Lewis, Ron (Carlisle)


Butler, Mrs Joyce (Wood Green)
Freud, Clement
Lipton, Marcus


Callaghan, Jim (Middleton &amp; P)
Garrett, John (Norwich S)
Litterick, Tom


Campbell, Ian
Garrett, W. E. (Walisend)
Lomas, Kenneth


Canavan, Dennis
George, Bruce
Loyden, Eddie


Cant, R. B.
Gilbert, Dr John
Luard, Evan


Carmichael, Neil
Ginsburg, David
Lyons, Edward (Bradford W)


Carter, Ray
Golding, John
Mabon, Dr J. Dickson


Carter-Jones, Lewis
Gould, Bryan
McCartney, Hugh


Cartwright, John
Gourlay, Harry
McElhone, Frank


Clemitson, Ivor
Graham, Ted
MacFarquhar, Roderick


Cocks, Michael (Bristol S)
Grant, George (Morpeth)
McGuire, Michael (Ince)


Cohen, Stanley
Grant, John (Islington C)
Mackenzie, Gregor


Coleman, Donald
Grimond, Rt Hon J.
Mackintosh, John P.


Colquhoun, Ms Maureen
Grocott, Bruce
Maclennan, Robert


Cook, Robin F. (Edin C)
Hamilton, James (Bothwell)
McMillan, Tom (Glasgow C)


Corbett, Robin
Hardy, Peter
McNamara, Kevin


Cox, Thomas (Tooting)
Harper, Joseph
Madden, Max


Craigen, J. M. (Maryhill)
Harrison, Walter (Wakefield)
Magee, Bryan


Cronin, John
Hart, Rt Hon Judith
Mahon, Simon


Cryer, Bob
Hattersley, Rt Hon Roy
Mallalleu, J. P. W.


Cunningham, G. (Islington S)
Hatton, Frank
Marks, Kenneth


Cunningham, Dr J. (Whiteh)
Hayman, Mrs Helene
Marquand, David


Dalyell, Tam
Heffer, Eric S.
Marshall, Dr Edmund (Goole)


Davidson, Arthur
Hooley, Frank
Marshall, Jim (Leicester S)


Davies, Bryan (Enfield N)
Howell, Rt Hon Denis
Maynard, Miss Joan


Davies, Denzil (Llanelli)
Howells, Geraint (Cardigan)
Meacher, Michael


Davies, Ifor (Gower)
Hoyle, Doug (Nelson)
Mellish, Rt Hon Robert


Davis, Clinton (Hackney C)
Huckfield, Les
Mendelson, John


Deakins, Eric
Hughes, Rt Hon C. (Anglesey)
Mikardo, Ian


Dean, Joseph (Leeds West)
Hughes, Mark (Durham)
Millan, Bruce




Miller, Mrs Millie (Ilford N)
Robinson, Geoffrey
Tomlinson, John


Mitchell, R. C. (Soton, Itchen)
Roderick, Caerwyn
Tomney, Frank


Molloy, William
Rodgers, George (Chorley)
Torney, Tom


Moonman, Eric
Rodgers, William (Stockton)
Tuck, Raphael


Morris, Alfred (Wythenshawe)
Rooker, J. W.
Urwin, T. W.


Morris, Charles R. (Openshaw)
Ross, Stephen (Isle of Wight)
Varley, Rt Hon Eric G.


Morris, Rt Hon J.(Aberavon)
Ross, Rt. Hon W. (Kilmarnock)
Wainwright, Edwin (Dearne V)


Moyle, Roland
Rowlands, Ted
Walden, Brian (B'ham, L'dyw'd)


Mulley, Rt Hon Frederick
Sandelson, Neville
Walker, Terry (Kingswood)


Murray, Rt Hon Ronald King
Sedgemore, Brian
Ward, Michael


Newens, Stanley
Selby, Harry
Watkins, David


Noble, Mike
Shaw, Arnold (Ilford South)
Watkinson, John


Oakes, Gordon
Sheldon, Robert (Ashton-u-Lyne)
Weetch, Ken


Ogden, Eric
Shore, Rt Hon Peter
Weitzman, David


O'Halloran, Michael
Short, Rt Hon E. (Newcastle C)
Wellbeloved, James


Orbach, Maurice
Short, Mrs Renée (Wolv NE)
White, Frank R. (Bury)


Orme, Rt Hon Stanley
Silkin, Rt Hon John (Deptford)
White, James (Pollok)


Ovenden, John
Silkin, Rt Hon S. C. (Dulwich)
Whitehead, Phillip


Owen, Dr David
Sillars, James
Whitlock, William


Palmer, Arthur
Silverman, Julius
Wigley, Dafydd


Park, George
Skinner, Dennis
Willey, Rt Hon Frederick


Parker, John
Small, William
Williams, Alan (Swansea W)


Parry, Robert
Smith, Cyril (Rochdale)
Williams, Alan Lee (Hornch'ch)


Pavitt, Laurie
Smith, John (N Lanarkshire)
Williams, Rt Hon Shirley (Hertford)


Peart, Rt Hon Fred
Spearing, Nigel
Williams, Sir Thomas


Pendry, Tom
Stallard, A. W.
Wilson, Alexander (Hamilton)


Penhaligon, David
Stewart, Rt Hon M. (Fulham)
Wilson, Rt Hon H. (Huyton)


Perry, Ernest
Strang, Gavin
Wilson, William (Coventry SE)


Phipps, Dr Colin
Strauss, Rt Hon G. R.
Wise, Mrs Audrey


Prentice, Rt Hon Reg
Summerskill, Hon Dr Shirley
Woodall, Alec


Prescott, John
Swain, Thomas
Woof, Robert


Price, C. (Lewisham W)
Thomas, Jeffrey (Abertillery)
Wrigglesworth, Ian


Price, William (Rugby)
Thomas, Mike (Newcastle E)
Young, David (Bolton E)


Radice, Giles
Thomas, Ron (Bristol NW)



Rees, Rt Hon Merlyn (Leeds S)
Thorne, Stan (Preston South)
TELLERS FOR THE AYES:


Richardson, Miss Jo
Tierney, Sydney
Mr. Peter Snape and


Roberts, Albert (Normanton)
Tinn, James
Mr. David Stoddart.


Roberts, Gwilym (Cannock)






NOES


Adley, Robert
Corrie, John
Hall-Davis, A. G. F.


Alison, Michael
Critchley, Julian
Hamilton, Michael (Salisbury)


Amery, Rt Hon Julian
Crouch, David
Hampson, Dr Keith


Arnold, Tom
Crowder, F. P.
Hannam, John


Atkins, Rt Hon H. (Spelthorne)
Davies, Rt Hon J. (Knutsford)
Harvie Anderson, Rt Hon Miss


Awdry, Daniel
Dean, Paul (N Somerset)
Hastings, Stephen


Baker, Kenneth
Dodsworth, Geoffrey
Havers, Sir Michael


Banks, Robert
Douglas-Hamilton, Lord James
Hawkins, Paul


Bell, Ronald
Drayson, Burnaby
Hayhoe, Barney


Bennett, Dr Reginald (Fareham)
du Cann, Rt Hon Edward
Heseltine, Michael


Benyon, W.
Dunlop, John
Hicks, Robert


Berry, Hon Anthony
Durant, Tony
Higgins, Terence L.


Biffen, John
Dykes, Hugh
Holland, Philip


Biggs-Davison, John
Edwards, Nicholas (Pembroke)
Hordern, Peter


Blaker, Peter
Elliott, Sir William
Howe, Rt Hon Sir Geoffrey


Body, Richard
Emery, Peter
Howell, David (Guildford)


Boscawen, Hon Robert
Evans, Gwynfor (Carmarthen)
Howell, Ralph (North Norfolk)


Bottomley, Peter
Eyre, Reginald
Hunt, David (Wirral)


Bowden, A. (Brighton, Kemptown)
Fairbairn, Nicholas
Hunt, John


Boyson, Dr Rhodes (Brent)
Fairgrieve, Russell
Hurd, Douglas


Bradford, Rev Robert
Farr, John
Hutchison, Michael Clark


Braine, Sir Bernard
Fell, Anthony
Irving, Charles (Cheltenham)


Brittan, Leon
Fisher, Sir Nigel
James, David


Brocklebank-Fowler, C.
Fletcher-Cooke, Charles
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)


Brotherton, Michael
Fookes, Miss Janet
Jessel, Toby


Brown, Sir Edward (Bath)
Forman, Nigel
Johnson Smith, G. (E Grinstead)


Bryan, Sir Paul
Fox, Marcus
Jones, Arthur (Daventry)


Buchanan-Smith, Alick
Fry, Peter
Jopling, Michael


Buck, Antony
Galbraith, Hon. T. G. D.
Joseph, Rt Hon Sir Keith


Budgen, Nick
Gardiner, George (Reigate)
Kaberry, Sir Donald


Bulmer, Esmond
Gardner, Edward (S Fylde)
Kellett-Bowman, Mrs Elaine


Butler, Adam (Bosworth)
Gilmour, Rt Hon Ian (Chesham)
Kershaw, Anthony


Carlisle, Mark
Gilmour, Sir John (East Fife)
Kimball, Marcus


Carson, John
Glyn, Dr Alan
King, Evelyn (South Dorset)


Chalker, Mrs Lynda
Goodhart, Philip
King, Tom (Bridgwater)


Clark, Alan (Plymouth, Sutton)
Gorst, John
Kitson, Sir Timothy


Clark, William (Croydon S)
Gow, Ian (Eastbourne)
Knight, Mrs Jill


Clarke, Kenneth (Rushcliffe)
Gower, Sir Raymond (Barry)
Knox, David


Clegg, Walter
Grant, Anthony (Harrow C)
Lamont, Norman


Cockcroft, John
Gray, Hamish
Lane, David


Cooke, Robert (Bristol W)
Griffiths, Eldon
Langford-Holt, Sir John


Cope, John
Grist, Ian
Lawrence, Ivan


Cordle, John H.
Grylls, Michael
Lawson, Nigel


Cormack, Patrick
Hall, Sir John
Lester, Jim (Beeston)







Lewis, Kenneth (Rutland)
Oppenheim, Mrs Sally
Smith, Dudley (Warwick)


Lloyd, Ian
Osborn, John
Spence, John


Loveridge, John
Page, John (Harrow West)
Spicer, Jim (W Dorset)


Luce, Richard
Page, Rt Hon R. Graham (Crosby)
Spicer, Michael (S Worcester)


McCrindle, Robert
Parkinson, Cecil
Sproat, Iain


McCusker, H.
Pattie, Geoffrey
Stainton, Keith


Macfarlane, Neil
Percival, Ian
Stanbrook, Ivor


MacGregor, John
Peyton, Rt Hon John
Stanley, John


Macmillan, Rt Hon M. (Farnham)
Pink, R. Bonner
Steen, Anthony (Wavertree)


McNair-Wilson, M. (Newbury)
Powell, Rt Hon J. Enoch
Stewart, Ian (Hitchin)


McNair-Wilson, P. (New Forest)
Price, David (Eastleigh)
Stokes, John


Madel, David
Prior, Rt Hon James
Stradling Thomas, J.


Marshall, Michael (Arundel)
Pym, Rt Hon Francis
Tapsell, Peter


Marten, Neil
Raison, Timothy
Taylor, R. (Croydon NW)


Mates, Michael
Rathbone, Tim
Taylor, Teddy (Cathcart)


Maude, Angus
Rawlinson, Rt Hon Sir Peter
Tebbit, Norman


Maudling, Rt Hon Reginald
Rees, Peter (Dover &amp; Deal)
Temple-Morris, Peter


Maxwell-Hyslop, Robin
Reid, George
Thomas, Rt Hon P. (Hendon S)


Mayhew, Patrick
Renton, Rt Hon Sir D. (Hunts)
Townsend, Cyril D.


Meyer, Sir Anthony
Renton, Tim (Mid-Sussex)
Trotter, Neville


Miller, Hal (Bromsgrove)
Ridley, Hon Nicholas
Tugendhat, Christopher


Mills, Peter
Ridsdale, Julian
van Straubenzee, W. R.


Miscampbell, Norman
Rifkind, Malcolm
Vaughan, Dr Gerard


Mitchell, David (Basingstoke)
Rippon, Rt. Hon Geoffrey
Viggers, Peter


Moate, Roger
Roberts, Michael (Cardiff NW)
Wakeham, John


Molyneaux, James
Roberts, Wyn (Conway)
Walder, David (Clitheroe)


Monro, Hector
Rodgers, Sir John (Sevenoaks)
Walker, Rt Hon P. (Worcester)


Montgomery, Fergus
Ross, William (Londonderry)
Walker-Smith, Rt Hon Sir Derek


Moore, John (Croydon C)
Rossi, Hugh (Hornsey)
Wall, Patrick


More, Jasper (Ludlow)
Rost, Peter (SE Derbyshire)
Walters, Dennis


Morgan, Geraint
Royle, Sir Anthony
Watt, Hamish


Morgan-Giles, Rear-Admiral
Sainsbury, Tim
Weatherill, Bernard


Morris, Michael (Northampton S)
St. John-Stevas, Norman
Wells, John


Morrison, Charles (Devizes)
Scott, Nicholas
Whitelaw, Rt Hon William


Morrison, Hon Peter (Chester)
Scott-Hopkins, James
Wiggin, Jerry


Mudd, David
Shaw, Giles (Pudsey)
Winterton, Nicholas


Neave, Airey
Shelton, William (Streatham)
Wood, Rt Hon Richard


Nelson, Anthony
Shepherd, Colin
Young, Sir G. (Ealing, Acton)


Neubert, Michael
Shersby, Michael
Younger, Hon George


Newton, Tony
Silvester, Fred



Normanton, Tom
Sims, Roger
TELLERS FOR THE NOES:


Nott, John
Sinclair, Sir George
Mr. Spencer Le Merchant and


Onslow, Cranley
Skeet, T. H. H.
Mr. Carol Mather.

Question accordingly agreed to.

Mr. Denzil Davies: I beg to move Amendment No. 3, in page 2, line 19, leave out 'subsection (1) above' and insert 'this Act'.
This is a drafting amendment to make the interpretation Clause, now Clause 47, a comprehensive index of terms used in the Bill. As a result, Clause 47 now assigns to the term "major interests" the definition in Clause 2(3). The need for a comprehensive index was raised in Committee by the Opposition. We met most of their criticisms in Committee but could not do so in this case until now.

Amendment agreed to.

Mr. Denzil Davies: I beg to move Amendment No. 5, in page 3, line 4, leave out 'fifty' and insert 'thirty-five'.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine): It will be convenient to discuss at the same time the following amendments:

No. 6, in page 3, line 4, leave out 'fifty' and insert 'twenty-five'.

Government Amendment No. 7.

No. 8, in page 3, line 8, leave out 'of less than fifty' and insert 'not exceeding twenty-five'.

Government Amendment No. 9.

No. 10, in page 3, line 17, leave out 'fifty' and insert 'twenty-five'.

Government Amendment No. 123.

No. 124, in Schedule 1, page 82, line 5, leave out '50' and insert 'twenty-five'.

Mr. Davies: These amendments result from the debates in Committee.
As the Bill stands, there is a major interest even though the lease to which the reversion is subject is not a long lease. Under Clause 2(4) a lease is a long lease if it has more than 50 years to run at the date of the deemed disposal. The amendment seeks to reduce this period to 35 years, thus allowing more leases to qualify as long leases.
The other amendments ensure that the widening of relief does not affect the rule which regards reversions on leases as major interests and so subject to deemed


disposal procedure. There was criticism in Committee to the effect that 50 years was too long a period. It was said that leases with reversions of 50 years were not worth much. As a result of those criticisms we looked at the matter again. These amendments seek to reduce the period to 35 years, which we believe is more reasonable.
We held discussions with the Royal Institution of Chartered Surveyors. As a result of representations and discussions, we concluded that 35 years was the right period for the reversion to be a major interest for the purposes of the legislation.

Mr. Graham Page: We considered that as the Bill stood 50 years was a ridiculous period. We therefore proposed an amendment to reduce the period of 50 years to one of 25 years, as being more consonant with the value of the reversion to a lease becoming a major interest in the property.

At this stage of the Bill we have tried to compromise a little further—but not merely for the sake of compromise. As a result of the advice that we have received we believe that 25 years is the right period. The Minister proposed the period of 35 years. He puts the Opposition in a little difficulty. If we vote against his amendment—which seeks to substitute the figure 35 for the figure 50—it will appear that we wish to retain the period of 50 years. The only method open to us to register our objection is to vote against the Minister's amendment to insert "35". We wish to insert "25". I do not think that the Minister's proposal sufficiently meets our wishes.

Question put, That the amendment be made:—

The House divided: Ayes 280, Noes 266.

Division No.196.]
AYES
[11. 23 p.m.


Abse, Leo
Cunningham, G. (Islington S)
Graham, Ted


Allaun, Frank
Cunningham, Dr J. (Whiteh)
Grant, George (Morpeth)


Anderson, Donald
Dalyell, Tam
Grant, John (Islington C)


Archer, Peter
Davidson, Arthur
Grocott, Bruce


Armstrong, Ernest
Davies, Bryan (Enfield N)
Hardy, Peter


Ashton, Joe
Davies, Denzil (Llanelli)
Harper, Joseph


Atkins, Ronald (Preston N)
Davies, Ifor (Gower)
Harrison, Walter (Wakefield)


Atkinson, Norman
Davis, Clinton (Hackney C)
Hart, Rt Hon Judith


Bagier, Gordon A. T.
Deakins, Eric
Hattersley, Rt Hon Roy


Barnett, Guy (Greenwich)
Dean, Joseph (Leeds West)
Hatton, Frank


Barnett, Rt Hon Joel (Heywood)
de Freitas, Rt Hon Sir Geoffrey
Hayman, Mrs Helene


Bates, Alf
Dell, Rt Hon Edmund
Heffer, Eric S.


Bean, R. E.
Dempsey, James
Hooley, Frank


Benn, Rt Hon Anthony Wedgwood
Doig, Peter
Howell, Rt Hon Denis


Bennett, Andrew (Stockport N)
Dormand, J. D.
Hoyle, Doug (Nelson)


Bidwell, Sydney
Douglas-Mann, Bruce
Huckfield, Les


Bishop, E. S.
Duffy, A. E. P.
Hughes, Rt Hon C. (Anglesey)


Blenkinsop, Arthur
Dunn, James A.
Hughes, Mark (Durham)


Boardman, H.
Dunnett, Jack
Hughes, Robert (Aberdeen N)


Booth, Rt Hon Albert
Dunwoody, Mrs Gwyneth
Hughes, Roy (Newport)


Bottomley, Rt Hon Arthur
Eadie, Alex
Hunter, Adam


Boyden, James (Bish Auck)
Edge, Geoff
Irvine, Rt Hon Sir A. (Edge Hill)


Bradley, Tom
Edwards, Robert (Wolv SE)
Irving, Rt Hon S. (Dartford)


Bray, Dr Jeremy
Ellis, John (Brigg &amp; Scun)
Jackson, Colin (Brighouse)


Brown, Hugh D. (Provan)
Ellis, Tom (Wrexham)
Jackson, Miss Margaret (Lincoln)


Brown, Robert C. (Newcastle W)
English, Michael
Janner, Greville


Brown, Ronald (Hackney S)
Ennals, David
Jay, Rt Hon Douglas


Buchan, Norman
Evans, Fred (Caerphilly)
Jeger, Mrs Lena


Buchanan, Richard
Evans, Ioan (Aberdare)
Jenkins, Hugh (Putney)


Butler, Mrs Joyce (Wood Green)
Ewing, Harry (Stirling)
John, Brynmor


Callaghan, Jim (Middleton &amp; P)
Faulds, Andrew
Johnson, James (Hull West)


Campbell, Ian
Fernyhough, Rt Hon E.
Johnson, Walter (Derby S)


Canavan, Dennis
Flannery, Martin
Jones, Dan (Burnley)


Cant, R. B.
Fletcher, Raymond (Ilkeston)
Judd, Frank


Carmichael, Neil
Fletcher, Ted (Darlington)
Kaufman, Gerald


Carter, Ray
Foot, Rt Hon Michael
Kelley, Richard


Carter-Jones, Lewis
Ford, Ben
Kerr, Russell


Cartwright, John
Forrester, John
Kilroy-Silk, Robert


Clemitson, Ivor
Fowler, Gerald (The Wrekin)
Kinnock, Neil


Cocks, Michael (Bristol S)
Fraser, John (Lambeth, N'w'd)
Lambie, David


Cohen, Stanley
Freeson, Reginald
Lamborn, Harry


Coleman, Donald
Garrett, John (Norwich S)
Lamond, James


Colquhoun, Ms Maureen
Garrett, W. E. (Wallsend)
Latham, Arthur (Paddington)


Cook, Robin F. (Edin C)
George, Bruce
Leadbitter, Ted


Corbett, Robin
Gilbert, Dr John
Lee, John


Cox, Thomas (Tooting)
Ginsburg, David
Lestor, Miss Joan (Eton &amp; Slough)


Craigen, J. M. (Maryhill)
Golding, John
Lever, Rt Hon Harold


Cronin, John
Gould, Bryan
Lewis, Ron (Carlisle)


Cryer, Bob
Gourlay, Harry
Lipton, Marcus




Litterick, Tom
Owen, Dr David
Strauss, Rt Hon G. R.


Lomas, Kenneth
Palmer, Arthur
Summerskill, Hon Dr Shirley


Loyden, Eddie
Park, George
Swain, Thomas


Luard, Evan
Parker, John
Thomas, Jeffrey (Abertillery)


Lyons, Edward (Bradford W)
Parry, Robert
Thomas, Mike (Newcastle E)


Mabon, Dr J. Dickson
Pavitt, Laurie
Thomas, Ron (Bristol NW)


McCartney, Hugh
Peart, Rt Hon Fred
Thorne, Stan (Preston South)


McElhone, Frank
Perry, Ernest
Tierney, Sydney


MacFarquhar, Roderick
Phipps, Dr Colin
Tinn, James


McGuire, Michael (Ince)
Prentice, Rt Hon Reg
Tomlinson, John


Mackenzie, Gregor
Prescott, John
Tomney, Frank


Mackintosh, John P.
Price, C. (Lewisham W)
Torney, Tom


Maclennan, Robert
Price, William (Rugby)
Tuck, Raphael


McMillan, Tom (Glasgow C)
Radice, Giles
Urwin, T. W.


McNamara, Kevin
Rees, Rt Hon Merlyn (Leeds S)
Varley, Rt Hon Eric G.


Madden, Max
Richardson, Miss Jo
Wainwright, Edwin (Dearne V)


Magee, Bryan
Roberts, Albert (Normanton)
Walden, Brian (B'ham, L'dyw'd)


Mahon, Simon
Roberts, Gwilym (Cannock)
Walker, Terry (Kingswood)


Marks, Kenneth
Robinson, Geoffrey
Ward, Michael


Marquand, David
Roderick, Caerwyn
Watkins, David


Marshall, Dr Edmund (Goole)
Rodgers, George (Chorley)
Watkinson, John


Marshall, Jim (Leicester S)
Rodgers, William (Stockton)
Weetch, Ken


Maynard, Miss Joan
Rooker, J. W.
Weitzman, David


Meacher, Michael
Ross, Rt. Hon W. (Kilmarnock)
Wellbeloved, James


Mellish, Rt Hon Robert
Rowlands, Ted
White, Frank R. (Bury)


Mendelson, John
Sandelson, Neville
White, James (Pollok)


Mikardo, Ian
Sedgemore, Brian
Whitehead, Phillip


Millan, Bruce
Selby, Harry
Whitlock, William


Miller, Mrs Millie (Ilford N)
Shaw, Arnold (Ilford South)
Willey, Rt Hon Frederick


Mitchell, R. C. (Soton, Itchen)
Sheldon, Robert (Ashton-u-Lyne)
Williams, Alan (Swansea W)


Molloy, William
Shore, Rt Hon Peter
Williams, Alan Lee (Hornch'ch)


Moonman, Eric
Short, Rt Hon E. (Newcastle C)
Williams, Rt Hon Shirley (Hertford)


Morris, Alfred (Wythenshawe)
Short, Mrs Renée (Wolv NE)
Williams, Sir Thomas


Morris, Charles R. (Openshaw)
Silkin, Rt Hon John (Deptford)
Wilson, Alexander (Hamilton)


Morris, Rt Hon J.(Aberavon)
Silkin, Rt Hon S. C. (Dulwich)
Wilson, Rt Hon H. (Huyton)


Moyle, Roland
Sillars, James
Wilson, William (Coventry SE)


Mulley, Rt Hon Frederick
Silverman, Julius
Wise, Mrs Audrey


Murray, Rt Hon Ronald King
Skinner, Dennis
Woodall, Alec


Newens, Stanley
Small, William
Woof, Robert


Noble, Mike
Smith, John (N Lanarkshire)
Wrigglesworth, Ian


Oakes, Gordon
Snape, Peter
Young, David (Bolton E)


Ogden, Eric
Spearing, Nigel



O'Halloran, Michael
Stallard, A. W.
TELLERS FOR THE AYES:


Orbach, Maurice
Stewart, Rt Hon M. (Fulham)
Mr. James Hamilton and


Orme, Rt Hon Stanley
Stoddart, David
Mr. Tom Pendry


Ovenden, John
Strang, Gavin





NOES


Adley, Robert
Chalker, Mrs Lynda
Fry, Peter


Alison, Michael
Clark, Alan (Plymouth, Sutton)
Galbraith, Hon. T. G. D.


Amery, Rt Hon Julian
Clark, William (Croydon S)
Gardiner, George (Reigate)


Arnold, Tom
Clarke, Kenneth (Rushcliffe)
Gardner, Edward (S Fylde)


Atkins, Rt Hon H. (Spelthorne)
Clegg, Walter
Gilmour, Rt Hon Ian (Chesham)


Awdry, Daniel
Cockcroft, John
Gilmour, Sir John (East Fife)


Baker, Kenneth
Cooke, Robert (Bristol W)
Glyn, Dr Alan


Banks, Robert
Cope, John
Goodhart, Philip


Beith, A. J.
Cordle, John H.
Goodlad, Alastair


Bell, Ronald
Cormack, Patrick
Gorst, John


Bennett, Dr Reginald (Fareham)
Corrie, John
Gow, Ian (Eastbourne)


Benyon, W.
Crouch, David
Gower, Sir Raymond (Barry)


Berry, Hon Anthony
Crowder, F. P.
Grant, Anthony (Harrow C)


Biffen, John
Davies, Rt Hon J. (Knutsford)
Gray, Hamish


Biggs-Davison, John
Dean, Paul (N Somerset)
Griffiths, Eldon


Blaker, Peter
Dodsworth, Geoffrey
Grimond, Rt Hon J.


Body, Richard
Douglas-Hamilton, Lord James
Grist, Ian


Boscawen, Hon Robert
Drayson, Burnaby
Grylls, Michael


Bottomley, Peter
du Cann, Rt Hon Edward
Hall, Sir John


Bowden, A. (Brighton, Kemptown)
Dunlop, John
Hall-Davis, A. G. F.


Boyson, Dr Rhodes (Brent)
Durant, Tony
Hamilton, Michael (Salisbury)


Bradford, Rev Robert
Dykes, Hugh
Hampson, Dr Keith


Braine, Sir Bernard
Edwards, Nicholas (Pembroke)
Hannam, John


Brittan, Leon
Elliott, Sir William
Harvie Anderson, Rt Hon Miss


Brocklebank-Fowler, C.
Emery, Peter
Hastings, Stephen


Brotherton, Michael
Eyre, Reginald
Havers, Sir Michael


Brown, Sir Edward (Bath)
Fairbairn, Nicholas
Hawkins, Paul


Bryan, Sir Paul
Fairgrieve, Russell
Hayhoe, Barney


Buchanan-Smith, Alick
Farr, John
Heseltine, Michael


Buck, Antony
Fell, Anthony
Hicks, Robert


Budgen, Nick
Fisher, Sir Nigel
Higgins, Terence L.


Bulmer, Esmond
Fletcher-Cooke, Charles
Holland, Philip


Butler, Adam (Bosworth)
Fookes, Miss Janet
Hooson, Emlyn


Carlisle, Mark
Forman, Nigel
Hordern, Peter


Carson, John
Fox, Marcus
Howe, Rt Hon Sir Geoffrey







Howell, Ralph (North Norfolk)
Moate, Roger
St. John-Stevas, Norman


Howells, Geraint (Cardigan)
Molyneaux, James
Scott, Nicholas


Hunt, David (Wirral)
Monro, Hector
Scott-Hopkins, James


Hunt, John
Montgomery, Fergus
Shaw, Giles (Pudsey)


Hurd, Douglas
Moore, John (Croydon C)
Shelton, William (Streatham)


Hutchison, Michael Clark
More, Jasper (Ludlow)
Shepherd, Colin


Irving, Charles (Cheltenham)
Morgan, Geraint
Shersby, Michael


James, David
Morgan-Giles, Rear-Admiral
Sims, Roger


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Morris, Michael (Northampton S)
Sinclair, Sir George


Jessel, Toby
Morrison, Charles (Devizes)
Skeet, T. H. H.


Johnson Smith, G. (E Grinstead)
Morrison, Hon Peter (Chester)
Smith, Cyril (Rochdale)


Jones, Arthur (Daventry)
Mudd, David
Smith, Dudley (Warwick)


Jopling, Michael
Neave, Airey
Spence, John


Joseph, Rt Hon Sir Keith
Nelson, Anthony
Spicer, Jim (W Dorset)


Kaberry, Sir Donald
Neubert, Michael
Spicer, Michael (S Worcester)


Kellett-Bowman, Mrs Elaine
Newton, Tony
Sproat, Iain


Kershaw, Anthony
Normanton, Tom
Stainton, Keith


Kimball, Marcus
Nott, John
Stanbrook, Ivor


King, Evelyn (South Dorset)
Onslow, Cranley
Stanley, John


King, Tom (Bridgwater)
Oppenheim, Mrs Salty
Steel, David (Roxburgh)


Kitson, Sir Timothy
Osborn, John
Steen, Anthony (Wavertree)


Knight, Mrs Jill
Page, John (Harrow West)
Stewart, Ian (Hitchin)


Knox, David
Page, Rt Hon R. Graham (Crosby)
Stokes, John


Lamont, Norman
Parkinson, Cecil
Stradling Thomas, J.


Lane, David
Pattie, Geoffrey
Tapsell, Peter


Langford-Holt, Sir John
Penhaligon, David
Taylor, R. (Croydon NW)


Lawrence, Ivan
Percival, Ian
Taylor, Teddy (Cathcart)


Lawson, Nigel
Peyton, Rt Hon John
Tebbit, Norman


Le Marchant, Spencer
Pink, R. Bonner
Temple-Morris, Peter


Lewis, Kenneth (Rutland)
Powell, Rt Hon J. Enoch
Thomas, Rt Hon P. (Hendon S)


Lloyd, Ian
Price, David (Eastleigh)
Townsend, Cyril D.


Loveridge, John
Prior, Rt Hon James
Trotter, Neville


Luce, Richard
Pym, Rt Hon Francis
Tugendhat, Christopher


McCrindle, Robert
Raison, Timothy
van Straubenzee, W. R.


McCusker, H.
Rathbone, Tim
Vaughan, Dr Gerard


Macfarlane, Neil
Rawlinson, Rt Hon Sir Peter
Viggers, Peter


MacGregor, John
Rees, Peter (Dover &amp; Deal)
Wakeham, John


Macmillan, Rt Hon M. (Farnham)
Rees-Davies, W. R.
Walker, Rt Hon P. (Worcester)


McNair-Wilson, M. (Newbury)
Reid, George
Walker-Smith, Rt Hon Sir Derek


McNair-Wilson, p. (New Forest)
Renton, Rt Hon Sir D. (Hunts)
Wall, Patrick


Madel, David
Renton, Tim (Mid-Sussex)
Watt, Hamish


Marshall, Michael (Arundel)
Ridley, Hon Nicholas
Weatherill, Bernard


Marten, Neil
Ridsdale, Julian
Wells, John


Mates, Michael
Rifkind, Malcolm
Whitelaw, Rt Hon William


Mather, Carol
Rippon, Rt. Hon Geoffrey
Wiggin, Jerry


Maude, Angus
Roberts, Michael (Cardiff NW)
Wigley, Dafydd


Maudling, Rt Hon Reginald
Roberts, Wyn (Conway)
Winterton, Nicholas


Maxwell-Hyslop, Robin
Rodgers, Sir John (Sevenoaks)
Wood, Rt Hon Richard


Mayhew, Patrick
Ross, Stephen (Isle of Wight)
Young, Sir G. (Ealing, Acton)


Meyer, Sir Anthony
Ross, William (Londonderry)
Younger, Hon George


Miller, Hal (Bromsgrove)
Rossi, Hugh (Hornsey)



Mills, Peter
Rost, Peter (SE Derbyshire)
TELLERS FOR THE NOES


Miscampbell, Norman
Royle, Sir Anthony
Mr. Jim Lester and


Mitchell, David (Basingstoke)
Sainsbury, Tim
Mr. Fred Silvester.

Question accordingly agreed to.

Amendments made: No. 7, in page 3, line 8 leave out "of less than fifty" and insert "not exceeding thirty-five".

No. 9, in page 3, line 17, leave out "fifty" and insert "thirty-five".—[Mr. Denzil Davies.]

Clause 3

PART DISPOSALS

Mr. Denzil Davies: I beg to move Amendment No. 11, in page 3, line 42 leave out "reserved" and insert "payable".
The amendment substitutes the expression
rent payable under a lease

for the present phrase
rent reserved under a lease".
The phrase in the Bill as it stands is not a term of art in Scots law. The hon. and learned Member for Kinross and West Perthshire (Mr. Fairbairn) criticised us in Committee for disregarding Scots law and we are changing the term in the Bill to ensure that it applies to both Scots and English law.

Mr. Sainsbury: We are all grateful to my hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) for putting us right on so many occasions on the differences between Scots and English law. I am sure that the Minister, coming as he does from a particular Principality, will be grateful that he was corrected, because neither he nor I was aware that the


term "reserved under a lease" was not used or understood in Scotland. We welcome the amendment.

Mr. Russell Fairgrieve: My hon. and learned Friend the Member for Kinross and West Perthshire (Mr. Fairbairn) and his hon. and un-learned Friend the Member for Aberdeenshire, West accept the amendment.

Mr. Cope: I did not have the benefit of serving on the Committee and I am not a Scot or a lawyer, but to me the word "payable" should be "receivable." The rent will be receivable and not payable. Would it not make more sense to use the word "receivable"?

Mr. Denzil Davies: The words "reserved under a lease" mean something to an English lawyer but the words "payable under a lease" mean something to both Scots and English lawyers.

Mr. Cope: The individual concerned, the owner of the interest, will not pay the rent but will receive it. If the clause is to mean anything to ordinary people, to accountants like myself, it should refer to rent received and not rent payable.

Mr. Davies: I hope that the hon. Member for Gloucestershire, South (Mr. Cope) will not think that I am being offensive, but the phrase has been drafted by lawyers for lawyers. Accountants were not taken into consideration.

Mr. Sainsbury: I think that I can go so far as to say that it would be comprehensible to surveyors.

Amendment agreed to.

Mr. Denzil Davies: I beg to move Amendment No. 14, in page 4, line 15, leave out from 'place' to end of line 16 and insert
'subject to subsection (2A) below, at the time at which the sum in question is received.
(2A) In any case where—

(a) there is a part disposal of an interest in land falling within subsection (2) above, and
(b) before the sum in question is received but after the right to receive it has accrued, there is a disposal, other than a deemed disposal, of that interest or of an interest of which it is a part for the purposes of Part I of Schedule 2 to this Act,

the part disposal shall be deemed for the

purposes of this Act to take place immediately before the disposal referred to in paragraph (b) above.'.

Mr Deputy Speaker: With this amendment we may discuss Government Amendment No. 98.

Mr. Davies: As the Bill stands, a sum which falls within the scope of subsection (2)—for example, on the receipt of planning permission—is taxable when the right to receive it accrues. That avoids some difficulties. However, in the "clause stand part" debate in Committee the provision was criticised as potentially harsh. The amendment alters the chargeable date to the time when the sum is received, and so meets the criticism made in Committee.

Mr. Sainsbury: As on many other occasions, we are indebted to my right hon. Friend the Member for Crosby (Mr. Page) for alerting the Committee to the point to which the Government are responding. We are also grateful to the Minister for moving the amendment.

Amendment agreed to.

Clause 5

RELEVANT BASE VALUE

Mr. Stephen Ross: I beg to move Amendment No. 15, in page 5, line 26, leave out from 'acquisition' to 'and' in line 27.
I am well aware that the matter was debated at some length in the Standing Committee, of which I was not a member. Perhaps I may crib from what was aptly said by the right hon. Member for Crosby (Mr. Page):
The absence of a complete record is no reason why one should not endeavour to assess the value of the property as at the time it was acquired."—[Official Report, Standing Committee J, 6th April 1976; c. 343.]
Why must we still stick to the April 1965 date? I know that that was the date when capital gains tax was introduced, but those records are suspect, as I know as a valuer.
I have argued long and hard with district valuers over, for instance, the value of farmland at April 1965. There was a decline in the four years to 1969, but then it started to rise again. The records are questionable. The Bill would be better


if we stopped referring back to April 1965. I see no reason why we should not stop doing so.
It is purely for the convenience of the Government and the Inland Revenue that the words are there. I ask the Minister to agree that the Bill would be better if those words were removed.

Mr. Denzil Davies: I am sorry, since the hon. Gentleman moved the amendment in such modest tones, that I must disappoint him. The date is chosen partly for convenience. One must find out the value of the land as at 6th April 1965. If it were necessary to go back further, it would become more difficult to find the current use value. We had long debates in Committee about the difficulty of valuation.
Some hon. Members said in Committee that we were talking about hypothetical values. If we had to go back further than 1965, we should be in a more and more hypothetical situation. The hon. Gentleman, who is a valuer and has far more experience than I have, will know that the further one goes back, the more difficult it is to find the current use value. That might not have been the cost of acquisition.
We are concerned with the current use value of land. The further back one goes the more difficult it is to find reliable estimates of current use value. That is why 1965 was chosen. It was not chosen principally because it was the year that capital gains tax was introduced, although that was partly the reason. If we went back further, we should make it more difficult for valuers and add to the complexities of existing legislation. For those reasons I cannot accept the amendment.

Mr. Stephen Ross: I shall not delay the House. I do not altogether accept the Minister's argument. Certain calculations and tables could be used to get a more accurate figure than basic values at April 1965, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

11.45 p.m.

Mr. Graham Page: I beg to move Amendment No. 16, in page 6, line 1, leave out 'wholly and exclusively'.
Clause 5 deals with relevant base value, in connection with which one has

to discover the sum paid for the property when it was acquired by the person who is selling. In the previous debate we were concerned with the date in terms of the cost of acquisition. In this debate we are also concerned with the cost of acquisition, but we must have regard to the definition that is provided—namely,
the consideration given by him or on his behalf wholly and exclusively for the acquisition of the interest".
It seems that the words "wholly and exclusively" are superfluous. Either it is the consideration paid for the acquisition, or it is not. If other properties are acquired at the same time—for example, if one is buying a property with goodwill or fixtures and fittings and the sum includes property that is not the interest in land—is it not confusing to have the words "wholly and exclusively"? If the consideration includes some payment for goods or something that is not an interest in land, the words are misleading. If one has to apportion the consideration to find out, again, the words are superfluous.

Mr. Denzil Davies: We had a fairly long debate in Committee on these words. The right hon. Gentleman has reiterated some of the arguments that he advanced to suggest that they are not necessary.
I explained in Committee that they are used quite freely in fiscal legislation but that I should consult the parliamentary draftsmen to ascertain whether they are absolutely necessary. Those consultations have taken place and I am advised—these are extremely technical matters—that if these words were left out, the omission would create more uncertainty. As this is fiscal legislation, it is undesirable to create uncertainty, especially in property matters where it is necessary to rely on a definite form of words. The words are well known and well used in fiscal legislation, and understood. There are cases involving their meaning in other aspects of tax law. I am advised that these words are better left in, otherwise we might find greater uncertainty. That would be undesirable in fiscal legislation dealing with property matters.

Mr. Fairbairn: The Minister has confirmed our worst fears in Committee


about these words. However, the Minister's approach is attractive in that he keeps admitting his own doubts. He tells us that we should create more uncertainty if the words were left out. Therefore, he now concedes, as we argued in Committee but as he then denied, that they create uncertainty by their presence. If he is now saying that they create more uncertainty if left out, I hope that he will now admit that the argument we advanced that they create uncertainty was sound.

Mr. Cope: Will the Minister of State answer the question asked by my right hon. Friend the Member for Crosby (Mr. Page)? He asked "What happens if one buys an interest in a piece of property or land which includes fixtures and fittings?". Supposing one pays one sum which is in the contract and includes not only the interest in the land but the carpets and curtains, as is frequently done with houses, flats, offices, and so on; clearly, that consideration will not have been wholly and exclusively for the acquisition of the interest. It will have been in part for the acquisition of those other matters. This is the nub of the uncertainty in the clause. As a result of the Minister's consultations since Committee, can he tell us the answer to that question?

Mr. Denzil Davies: The hon. Gentleman has posed a specific question. Even if the words "wholly and exclusively" were left out, his problem remains. If the words were "for the acquisition of land", his problem with regard to one price for fixtures and fittings and the land would remain. In most contracts there is a split between consideration for the land and the chattels. The problem is not solved by removing the words "wholly and exclusively". It is felt that the words should be in the clause in order to create greater certainty, and I should have thought that that reason would commend itself to hon. Members opposite.

Mr. Deputy Speaker: The Question is, That the amendment be made. All those in favour say "Aye"; to the contrary "No". I think the "Noes" have it. [Interruption.]

Mr. Graham Page: On a point of order, Mr. Deputy Speaker. You put the Question quite clearly whether the amendment should be accepted, and it was accepted. [HON. MEMBERS: "No."] Oh, yes. I heard an "Aye" from the Government side.

Mr. Deputy Speaker: If there is any doubt, the matter must be resolved.

Mr. Graham Page: If there is any doubt, I agree that you should put the Question again, Mr. Deputy Speaker, but I cannot imagine how there can be any doubt when the voices distinctly came from the Government side in favour of the amendment. Clearly on the Government Front Bench "Aye" was said.

Mr. Fairbairn: On a point of order, Mr. Deputy Speaker. Since the noises came wholly and exclusively from the Government side and they wholly and exclusively said "Aye", I cannot understand that there could be whole or exclusive doubt in any form.

Mr. Deputy Speaker: The Question is, That the amendment be made. As many as are of that opinion say "Aye"; to the contrary "No". I think the "Noes" have it.

Hon. Members: Aye.

Mr. Deputy Speaker: Clear the Lobby.

The House proceeded to a Division; but no Member being willing to act as Teller for the Ayes, Mr. DEPUTY SPEAKER declared that the Noes had it.

Mr. Denzil Davies: I beg to move Amendment No. 17, in page 6, line 36, leave out from '(iv)' to 'were' in line 37.
This is purely a drafting correction to Clause 5(1)(a) which results from the various changes made in Committee. It does not affect the substance of the Bill and I commend it to the House.

Amendment agreed to.

Mr. Davies: In view of the rapid progress that we have made today, I beg to move, That further consideration of the Bill, as amended, be now adjourned.

Question put:—

The House divided: Ayes 229, Noes 64.

Division No. 197.]
AYES
[12 midnight


Allaun, Frank
George, Bruce
Park, George


Archer, Peter
Gilbert, Dr John
Parry, Robert


Armstrong, Ernest
Golding, John
Pavitt, Laurie


Ashton, Joe
Gould, Bryan
Peart, Rt Hon Fred


Atkinson, Norman
Graham, Ted
Pendry, Tom


Barnett, Guy (Greenwich)
Grant, George (Morpeth)
Perry, Ernest


Barnett, Rt Hon Joel (Heywood)
Grant, John (Islington C)
Phipps, Dr Colin


Bates, Alf
Grocott, Bruce
Prentice, Rt Hon Reg


Bean, R. E.
Hamilton, James (Bothwell)
Prescott, John


Benn, Rt Hon Anthony Wedgwood
Hardy, Peter
Price, C. (Lewisham W)


Bennett, Andrew (Stockport N)
Harrison, Walter (Wakefield)
Price, William (Rugby)


Bidwell, Sydney
Hart, Rt Hon Judith
Radice, Giles


Bishop, E. S.
Hatton, Frank
Rees, Rt Hon Merlyn (Leeds S)


Blenkinsop, Arthur
Heffer, Eric S.
Reid, George


Boardman, H.
Hooley, Frank
Richardson, Miss Jo


Booth, Rt Hon Albert
Howell, Rt Hon Denis
Roberts, Gwilym (Cannock)


Boyden, James (Bish Auck)
Hoyle, Doug (Nelson)
Robinson, Geoffrey


Bray, Dr Jeremy
Hughes, Mark (Durham)
Roderick, Caerwyn


Brown, Hugh D. (Provan)
Hughes, Robert (Aberdeen N)
Rodgers, George (Chorley)


Brown, Robert C. (Newcastle W)
Hunter, Adam
Rodgers, William (Stockton)


Brown, Ronald (Hackney S)
Irvine, Rt Hon Sir A. (Edge Hill)
Rooker. J. W.


Buchan, Norman
Jaskson, Colin (Brighouse)
Ross, Rt. Hon W. (Kilmarnock)


Buchanan, Richard
Jackson, Miss Margaret (Lincoln)
Rowlands, Ted


Butler, Mrs Joyce (Wood Green)
Janner, Greville
Sedgemore, Brian


Callaghan, Jim (Middleton &amp; P)
John, Brynmor
Selby, Harry


Campbell, Ian
Johnson, James (Hull West)
Shaw, Arnold (Ilford South)


Canavan, Dennis
Jones, Dan (Burnley)
Shore, Rt Hon Peter


Cant, R. B.
Judd, Frank
Short, Rt Hon E. (Newcastle C)


Carmichael, Neil
Kaufman, Gerald
Short, Mrs Renée (Wolv NE)


Carter-Jones, Lewis
Kelley, Richard
Silkin, Rt Hon John (Deptford)


Cartwright, John
Kerr, Russell
Silkin, Rt Hon S. C. (Dulwich)


Clemitson, Ivor
Kilroy-Silk, Robert
Silverman, Julius


Cocks, Michael (Bristol S)
Kinnock, Neil
Skinner, Dennis


Cohen, Stanley
Lambie, David
Small, William


Coleman, Donald
Lamond, James
Smith, John (N Lanarkshire)


Colquhoun, Ms Maureen
Latham, Arthur (Paddington)
Snape, Peter


Cook, Robin F. (Edin C)
Lestor, Miss Joan (Eton &amp; Slough)
Spearing, Nigel


Corbett, Robin
Lipton, Marcus
Stallard, A. W.


Cox, Thomas (Tooting)
Litterick, Tom
Stewart, Rt Hon M. (Fulham)


Craigen, J. M. (Maryhill)
Lomas, Kenneth
Stoddart, David


Cryer, Bob
Loyden, Eddie
Strang, Gavin


Cunningham, G. (Islington S)
Lyons, Edward (Bradford W)
Strauss, Rt Hon G. R.


Cunningham, Dr J. (Whiteh)
McCartney, Hugh
Swain, Thomas


Dalyell, Tam
McElhone, Frank
Thomas, Ron (Bristol NW)


Davidson, Arthur
MacFarquhar, Roderick
Tomlinson, John


Davies, Bryan (Enfield N)
Mackenzie, Gregor
Torney, Tom


Davies, Denzil (Llanelli)
Mackintosh, John p.
Tuck, Raphael


Davies, Ifor (Gower)
Maclennan, Robert
Urwin, T. W.


Davis, Clinton (Hackney C)
McMillan, Tom (Glasgow C)
Varley, Rt Hon Eric G.


Deakins, Eric
Madden, Max
Wainwright, Edwin (Dearne V)


Dean, Joseph (Leeds West)
Magee, Bryan
Walker, Terry (Kingswood)


de Freitas, Rt Hon Sir Geoffrey
Mahon, Simon
Ward, Michael


Dell, Rt Hon Edmund
Marks, Kenneth
Watkins, David


Dempsey, James
Marquand, David
Watkinson, John


Doig, Peter
Marshall, Dr Edmund (Goole)
Wellbeloved, James


Dormand, J. D.
Maynard, Miss Joan
White, Frank R. (Bury)


Douglas-Mann, Bruce
Meacher, Michael
White, James (Pollok)


Duffy, A. E. P.
Mellish, Rt Hon Robert
Whitehead, Phillip


Dunn, James A.
Mendelson, John
Whitlock, William


Dunnett, Jack
Mikardo, Ian
Wigley, Dafydd


Dunwoody, Mrs Gwyneth
Millan, Bruce
Willey, Rt Hon Frederick


Eadie, Alex
Miller, Mrs Millie (Ilford N)
Williams, Alan (Swansea W)


Ellis, John (Brigg &amp; Scun)
Mitchell, R. C. (Soton, Itchen)
Williams, Alan Lee (Hornch'ch)


Ellis, Tom (Wrexham)
Molloy, William
Williams, Rt Hon Shirley (Hertford)


English, Michael
Moonman, Eric
Williams, Sir Thomas


Ewing, Harry (Stirling)
Morris, Alfred (Wythenshawe)
Wilson, Alexander (Hamilton)


Fernyhough, Rt Hon E.
Morris, Charles R. (Openshaw)
Wilson, Rt Hon H. (Huyton)


Flannery, Martin
Mulley, Rt Hon Frederick
Wilson, William (Coventry SE)


Fletcher, Raymond (Ilkeston)
Newens, Stanley
Wise, Mrs Audrey


Fletcher, Ted (Darlington)
Noble, Mike
Woodall, Alec


Foot, Rt Hon Michael
Oakes, Gordon
Woof, Robert


Ford, Ben
Ogden, Eric
Wrigglesworth, Ian


Forrester, John
O'Halloran, Michael
Young, David (Bolton E)


Fowler, Gerald (The Wrekin)
Orbach, Maurice



Fraser, John (Lambeth, N'w'd)
Orme, Rt Hon Stanley
TELLERS FOR THE AYES:


Freeson, Reginald
Ovenden, John
Mr. James Tinn and


Garrett, John (Norwich S)
Owen, Dr David
Mr. Joseph Harper.


Garrett, W. E. (Wallsend)
Palmer, Arthur








NOES


Atkins, Rt Hon H. (Spelthorne)
Higgins, Terence L.
Rost, Peter (SE Derbyshire)


Banks, Robert
Hooson, Emlyn
Sainsbury, Tim


Beith, A. J.
James, David
Scott-Hopkins, James


Berry, Hon Anthony
Jessel, Toby
Shaw, Giles (Pudsey)


Blaker, Peter
Jopling, Michael
Shepherd, Colin


Boscawen, Hon Robert
Langford-Holt, Sir John
Silvester, Fred


Bottomley, Peter
Lawrence, Ivan
Smith, Cyril (Rochdale)


Bowden, A. (Brighton, Kemptown)
Le Marchant, Spencer
Spicer, Michael (S Worcester)


Budgen, Nick
Lester, Jim (Beeston)
Stainton, Keith


Bulmer, Esmond
McCusker, H.
Stanbrook, Ivor


Carlisle, Mark
Mather, Carol
Steel, David (Roxburgh)


Carson, John
Monro, Hector
Stradling Thomas, J.


Chalker, Mrs Lynda
Montgomery, Fergus
Tebbit, Norman


Cooke, Robert (Bristol W)
Morrison, Hon Peter (Chester)
Trotter, Neville


Cope, John
Osborn, John
Vaughan, Dr Gerard


Cormack, Patrick
Penhaligon, David
Weatherill, Bernard


Corrie, John
Rees, Peter (Dover &amp; Deal)
Winterton, Nicholas


Durant, Tony
Ridley, Hon Nicholas
Young, Sir G. (Ealing, Acton)


Fairgrieve, Russell
Rippon, Rt. Hon Geoffrey



Fox, Marcus
Roberts, Michael (Cardiff NW)
TELLERS FOR THE NOES:


Glyn, Dr Alan
Rodgers, Sir John (Sevenoaks)
Mr. Nicholas Fairbairn and


Goodhart, Philip
Ross, Stephen (Isle of Wight)
Mr. Robin Maxwell-Hyslop.


Hawkins, Paul
Ross, William (Londonderry)

Question accordingly agreed to.

Bill, as amended (in the Standing Committee, to be further considered this day.

Orders of the Day — PETITIONS

Experiments in Psychosurgery

Mr. Bryan Gould: With your permission, Mr. Speaker, and that of the House, I wish to present a petition on behalf of the Southampton and Portsmouth chapter of the Citizens Commission for Human Rights.
The Commission is concerned with the practice of psychosurgery and the petition includes 2,000 signatures. The signatories are concerned about what they see as the damage caused by the practice of psychosurgery and by the growing volume of medical opinion which casts doubt upon its efficacy and morality. The petition says:
wherefore your petitioners humbly pray that this honourable House will halt the use of experimental brain and psychosurgery on the National Health Service and suspend a decision on further experimentation on mental patients and establish a commission to investigate and report on the past and present use of psychosurgery in the United Kingdom.

To lie upon the Table.

Aircraft and Shipbuilding Industries Bill

Mr. Robin Maxwell-Hyslop: With your permission, Mr. Speaker, and that of the House, I wish to present 19 petitions. They are all different, though they have some common points. They are all objection petitions against the Aircraft and Shipbuilding Industries Bill and in

each case the petitioner humbly prays that the petitioner or counsel may be heard against the provisions of the Bill and:
that such relief may be given to your petitioners as your honourable House shall deem meet.
Two of the petitions are from corporate bodies and 17 from individuals. If hon. Members wish, I can read them out in toto, but I propose to summarise the contents of some and to give a few as examples.
The petition under the common seal of Dowsett Holdings Ltd., which is the majority shareholder of Brooke Marine Ltd of Lowestoft, sets out the damage which the firm has already suffered through the Government's nationalisation proposals and the ability of the firm to remain a good employer without nationalisation and prays that the House does not enact the Bill.
The second petition is that from Bristol Channel Ship Repairers Ltd. under its common seal. It says:
(2) Your Petitioners are named in Schedule 2, Part 1 of the Bill and humbly beg to state that

(i) they have been unfairly and prejudicially selected for nationalisation
(ii) they have on numerous occasions, in writing, sought a meeting with the Secretary of State for Industry, all of which have been ref used
(iii) the Secretary of State for Industry has failed to explain to them how their nationalisation would improve or maintain the service which has to be provided to attract and retain customers and, therefore, maintain or increase employment.
(iv) the Secretary of State for Industry has failed to explain to them how their nationalisation could improve the employee participation programme being enjoyed by shiprepair workers in South Wales.


(v)(a) the Minister of State for Industry when winding up the Bill's Second Reading Debate, said in your Honourable House on 2nd December 1975:

'I hope, without difficulty, to be able to convince Bristol Channel Ship Repairers Limited of the overwhelming case for its own nationalisation'.
(b) to your Honourable House's Standing Committee D the Minister of State for Industry said on 13th January 1976 he had already made his arrangements to visit them and that he was intending to:
'to consult with management as well as workers…'
(c) the Minister of State for Industry has not at any time made contact with or visited them
(3) Your Petitioners submit that, in all the circumstances, the Bill should not be allowed to pass into law but if, in spite of the objections of your Petitioners, your honourable House sees fit to allow the Bill so to pass, your Petitioners submit that it should be amended to meet the points of concern to your Petitioners.
Therefore, your Petitioners humbly pray that they or their counsel may be heard against the provisions of the Bill and that such relief may be given to your Petitioners as your honourable House shall deem meet. And your Petitioners, as in duty bound, will ever pray…
I think it may assist the House if I take the principal points from a representative selection of a few of the petitions. For instance, there is a Mr. James Tallboy, a shop steward of the Amalgamated Union of Engineering Workers, who says:
As a shop steward in the AUEW employed in the shiprepairing industry in South Wales, I have wanted to meet the Secretary of State for Industry in order that he can explain to me how nationalisation of the ship repair industry in South Wales would benefit me and my fellow employees, but he has refused to see me.
Mr. Tallboy then says:
Your Petitioner submits that in all the circumstances the Bill should not be allowed to pass into law.
He ends by asking that he may be heard by himself or by counsel against the provisions of the Bill.
Mr. Tallboy is not alone among the petitioners from that distinguished union. Mr. Bernard Bulpin, also a shop steward of the AUEW, speaks in the same terms:
I am also very worried that due to the inevitable centralisation of the industry after nationalisation, the work which we now receive through our efficiency will be diverted to much larger yards where there are many more men employed than in South Wales; this will entail a reduction in my earnings and eventually my job will be in danger.

Mr. Bulpin also asks to be heard in person or by his counsel by this honourable House.
Mr. Colin Scammell, of the Plumbers Trade Union, has similar apprehensions—[HON. MEMBERS: "Read them out."] I must accede to the wishes of the House He says:
I am a member of the PTU and an employed in ship repairing in South Wales. I have wanted to meet the Secretary of State for Industry in order that he could explain to me how nationalisation of the ship repair industry in South Wales would benefit me and my fellow employees, but he refused to meet us.
He asks that in all the circumstances the Bill should not be allowed to pass into law, and that he should be heard by the House either in person or by counsel praying in support of his petition.
Then there is Mr. David Cotter of the Amalgamated Society of Boilermakers, Shipwrights, Blacksmiths and Structural Workers. He says, among other cogent and telling points to which the House ought to give consideration:
I believe nationalisation of the ship repair industry in South Wales will entail a reduction in the volume of work and therefore in the number of available jobs. I believe that the proposal to nationalise the ship repair industry in South Wales is wrong because many foreign owners will no longer send their ships to South Wales to repair. Nationalisation would swamp our small firm. Nationalisation without consent would be tyrannical.
He goes on to submit that, in all the circumstances, the Bill should not be allowed to pass into law and asks to be heard, either in person or by his counsel, against the provisions of the Bill and that such relief may be afforded to him as a petitioner
as your honourable House shall deem meet.
He ends by saying that he will pray for us. That is something of which this House may well be in need.
Then Mr. Roy Pearce of the Transport and General Workers Union says:
I believe that the proposals to nationalise a ship repair industry in South Wales is wrong because many owners will no longer send their ships for repair to South Wales and therefore our national economy will suffer.

Hon. Members: Why?

Mr. Maxwell-Hyslop: If hon. Members—

Mr. Deputy Speaker: The hon. Member for Tiverton (Mr. Maxwell-Hyslop) would be best advised to continue in the way he was going.

Mr. Greville Janner: On a point of order, Mr. Deputy Speaker. Is it not correct that an hon. Member who presents a petition is entitled either to read it or to summarise its contents and not to make comments, contentious or otherwise?

Mr. Deputy Speaker: That is correct, and the hon. Member for Tiverton has 19 petitions to present.

Mr. Maxwell-Hyslop: If the hon. and learned Member for Leicester, West (Mr. Janner) wishes me to read in toto each of the 19 and thereby to keep the servants of the House up for a late night, it will be on his head and not on mine. Not to do that is my only motive for summarising the contents and not reading them in toto.

Mr. Greville Janner: I am entitled to raise a point of order. I have no objection to the hon. Member for Tiverton (Mr. Maxwell-Hyslop) summarising the contents of the petitions. I accept that, subject to your ruling, Mr. Deputy Speaker, that is totally proper, but it is totally improper for him to make contentious comments.

Mr. Deputy Speaker: Comment or debate would be out of order, but I am under the impression that the hon. Member was summarising 19 petitions.

Mr. Maxwell-Hyslop: Yes. I was doing so with the object of saving the time of the House, although if the hon. and learned Member for Leicester, West finds my summary inadequate to convey to him the contents of the petitions, I shall, of course, accede to a request to read them in toto.
This petitioner, like others, wishes to be heard in support of his petition, either personally or by counsel, and prays the House that he may be accorded that.
Next we have Mr. Paul Ross of the Amalgamated Union of Engineering Workers. As an employee-director in the ship repair industry in South Wales, and a member of the AUEW, he expresses the same view of the danger which will be caused to the level of employment in South Wales. He says:

I believe nationalisation of the ship repair industry in South Wales will entail a reduction in the volume of work and therefore in the number of available jobs.
He also asks to be heard.
As you will see, Mr. Deputy Speaker, and as you will have noted, these are but a small proportion of the petitions, every one of which has been certified by the Journal Office as being in due form and which I present to the House on behalf of the petitioners.

Mr. Deputy Speaker: On behalf of the House and of the Chair, I express appreciation of the way in which the hon. Member for Tiverton has presented the 19 petitions and the brevity that he has shown.

To lie upon the Table.

Orders of the Day — TRADE BOYCOTTS (MIDDLE EAST)

Motion made and Question proposed, That this House do now adjourn—[Mr. Snape.]

12.25 a.m.

Mr. Eric Moonman: I have called for this Adjournment debate on the Arab boycott of British firms because I believe that this House should know what is happening and how it affects this country, and because I believe that it is time the Government came into the open and condemned the boycott.
Many Members may think that the Arab boycott is hardly a matter for this House. It is, they may say, directed against Israel, and, although regrettable, not our business. But it is our business, and for three reasons. First, it is affecting employment prospects in British industry. Secondly, it is playing an increasing role on our trade policy, which will ultimately have an effect on our foreign policy. Thirdly, it is producing situations which directly contravene the Government's race relations policy.
First, on the employment situation, to cut unemployment and promote growth in the economy we need to expand existing import—exports and find new markets. In the Middle East our opportunities for doing this are being severely limited by the boycott.
At first sight the effect of the boycott might appear insignificant since ostensibly it is directed only at firms which engage in commercial or financial transactions which promote the economic development of Israel, but as a result of extensive inquiries which I and others have undertaken recently, it is clear that the extent of the boycott has been considerably enlarged. One reason for this is that the opportunities for exercising the boycott have increased. As a result of the oil price increases more and more British firms are interested in redressing the trade balance by engaging in trade with the Arab countries. In response to this increased interest Arabs are now "blacklisting" not only those firms which trade direct with Israel, but companies which carry on business with firms doing business in Israel.
Companies not already trading with Israel are being asked to promise, as a precondition of developing business links with the Arabs, that they will not seek business in Israel. The process has gone so far that there are now many corporations actually volunteering to fulfil the Arab Boycott Office's demands. The huge Saudi Arabian and other Arab development schemes have given the Arabs leverage in their dealings with some of the largest industrial, chemical, communications and other corporate groups.
Let me be more specific. This month, four leading British construction companies have turned down an invitation to tender for a £9 million project on behalf of the Israel Ports Authority at Haifa, and three others have failed to reply. The firms which refused—Leonard Fairclough, Costain International, Taylor Woodrow International, and John Mowlem—said that they
could not take on any new work at this time
or that they were
not operating in the territory.
The total project is for about £140 million over five years. This is a large and important opportunity for British industry.
Can the responses of the companies really be true? Are the building and engineering trade unions satisfied that their members are so over-employed that they cannot even look at this project?

Can this country really turn down the prospect of earnings from abroad on a project of this size? Is it not too much of a coincidence that a similar invitation to more than a dozen British firms last year to tender for two tugboats for the same authority was received in the same way? Thirty international companies bid for the contract but not one of them was from Britain. The total order was worth £5 million.
There are other firms which have told me that they cannot risk jeopardising their existing Arab trade by accepting contracts with Israeli customers. Johnson-Richards H. R. Tiles Limited told the Anglo-Israel Chamber of Commerce in connection with a "know-how" agreement that it considered it
most inadvisable to become involved with Israel in any way whatsoever.
CETEC Systems Limited, a subsidiary of an American company, said it did not consider it
in our interest to appoint an Israeli representative or send supplies to Israel.
There are, of course, many others. I have not come here to condemn individual companies or individual executives for cowardice or even to judge their choice. It is up to the Government to give them a clear lead by denouncing the boycott and recommending British businessmen to take full advantage of the excellent trade opportunities being offered by Israel. They should point to the lead given by British Leyland, which has continued to trade with Israel and hopes to go on doing so, yet has not been required by the Arab Boycott Office to give any contrary undertaking.
In general, I have found that, whenever the Arab countries are interested and involved in a company's product and the company refuses to yield to the boycott, the Arabs blink. When the company is prepared to act resolutely and it is given some encouragement, the Arabs respond.
It is up to the British Government to act, because we cannot afford to lose ground in our trading relationship with Israel. This is one of the most critical things for our balance of trade. In 1975, our trade surplus with Israel—£146 million—was the third largest we had with any country, but the most recent available figures show that our exports to Israel, which increased by 8 per cent. in value


in 1975, are now 5 per cent. down on last year.
There must be an answer to this. I suggest that the Minister should give some attention not only to the general aspects of the boycott but to what it must mean in terms of trade between this country and Israel.
With our economy in its present condition we simply cannot afford to let this potential market slip away. We need the boost to the economy and our people need the jobs which this trade would bring. The nub of the issue is that we ought not to have to choose between the Arab and the Israeli markets. If our products are good enough, they will be bought by both, regardless of politics, if we stand firm for equal trading rights.
Secondly, submission to blackmail in our trading practices may change the way in which we approach the Middle East in our foreign policy. It would be a very naÏve politician who did not recognise the relationship between those two aspects. But giving into trade blackmail also makes us more vulnerable to political blackmail. Have we not already had enough of that with oil? We must stand firm at some point.
But there is another aspect of foreign policy which the Government should consider—that is, whether the blind eye which they turn to the operation of the Arab boycott in Britain is compatible with our international obligations, and especially our membership of the European Economic Community. The answer is a clear "No". The General Agreement on Tariffs and Trade, to which we subscribe, prohibits such practices under Articles 11, 13 and 20. Articles 85 and 86 of the Treaty of Rome proscribe actions such as those which make up the Arab trade boycott and prohibit the kind of "supplementary obligations" imposed on companies by the boycott offices. Further, Article 90 stresses that nationalised industries specially shall not act in contravention of the treaty.
Those Arab countries with which the EEC recently concluded trade agreements—Algeria, Tunisia and Morocco—and another four which are negotiating such agreements—Egypt, Lebanon, Syria and Jordan—are required to accept a provision in these treaties not to discriminate

between nationals of the EEC countries. But unless the Governments of the Nine stand united in their opposition to the boycott, loopholes will be found. The Arab countries have already declared that they would not adhere to the non-discrimination clauses where their essential security interests are involved. The EEC rejects this.
It is not enough that the EEC Commission should make declarations against the boycott. It has done so on several occasions in reply to questions about the boycott in the European Parliament. Declarations from individual Governments are also required. The British Government must make their position clear.
The third aspect of this delicate and urgent matter is that of race relations. I have had many tragic letters from British men and women who have applied for jobs only to be told that because of the firm's trade, or hopes of trade, with Arab countries they do not employ Jews. Many firms find that the existing employees cannot be promoted to jobs which would mean their travelling to Arab countries because their Jewish origins would prevent their being allowed entry.
That is a monstrous situation. We do not tolerate discrimination against black people or women—we have legislation to prevent it. Why should we allow discrimination against people on religious or ethnic grounds? It is hardly surprising that I have the written support of hon. Members—Catholic, Protestant and Jew—who want to see the Government take efficient action to prevent such discrimination.
That is the situation. What needs to be done? Three steps must be taken. First, I want a clear statement from the Minister which shows that he is aware of the anxiety felt by many people in this country about the way British interests are being damaged by the Arab boycott and which will give confidence to those companies which are confused about the proper response to suggestions that they should exercise discrimination in the companies with which they deal and the people whom they employ.
In the United States real headway has been made by Congress this month. A report is almost ready giving directions on how to deal with the boycott which


operates there as in most of Western Europe. Indeed, the United States has added to its armoury in dealing with this kind of abuse. The 1969 Export Administration Act provides muscle so that when companies want guidance, so as to work with parameters of confidence, there is someone to whom they may turn.
Secondly, I urge the Government to set up a confidential and high-level inquiry to sift through the documents and to assess the extent to which representatives from one or other of the Arab embassies in Britain have used monstrous means to intimidate British management into withdrawing from trade with Israel. The question of influence on and intimidation of staff in Arab embassies in London should be investigated.
The questions raised by the Arab boycott need answering. It is the Government's responsibility to answer them. To date the Government have found it expedient to turn a blind eye and to let the Race Relations Board deal with discrimination brought about by the boycott. But the extent of this discrimination which was revealed by the detailed evidence produced two months ago, demands a clear statement of Government policy. This House demands that.
At the end of the day it is not just a Jewish issue or a trading issue. The Arab boycott is really a test of the meaning of democracy and of the Government's dedication to the freedom of the individual to trade, to employ, or to be employed. The Arab boycott is affecting that freedom adversely for many of our citizens and the companies for which they work.
Freedom, as Solzhenitsyn has reminded us, is one and indivisible, and one has to take a moral attitude. What is the Government's moral attitude to the Arab boycott? British pride will deal harshly with any Government who yield to blackmail in whatever form, and that needs answering.

12.36 a.m.

Mr. Tim Sainsbury: I am grateful to the hon. Member for Basildon (Mr. Moonman) for providing me with this opportunity to express support from the Opposition side of the House for the concern that he has so ably demonstrated at the increasing activities of the Arab Boycott Office. Attempts to enforce a

boycott against a friendly Power or individuals on the ground of race or religion is a detestable practice which, like any form of blackmail or threat, depends for its success on promoting uncertainty about the consequences that might result if any person or company ignores the threat.
It is for that reason that there would be particular value in a clear and unequivocal declaration from the Government that they will, directly or indirectly, in no way co-operate with the odious objectives of the Boycott Office. If the Government make it quite clear that any company that co-operates will incur their severe displeasure, they will give great strength to those who might otherwise succumb to bullying. If, on the other hand, the Government were to give any sign of condoning the boycott, how could others be expected to resist?
As the hon. Gentleman said, efforts are now being made to introduce what is referred to as a tertiary boycott of those who do business with those who do business with Israel or have Jewish or Zionist, as the boycotters call them, directors. That will be the next demand, and it will be encouraged and widened if we fail to make our attitude clear. That further demand will inevitably prejudice the growth of trade with the Arab world—a growth of trade that we all wish to see. If we make clear our resistance and objection now, that trade will be able to grow.
The Government have an opportunity—and now is the moment for them to take advantage of it—to give a clear lead in resisting and condemning this odious practice.

12.38 a.m.

Mr. Greville Janner: I am obliged to my hon. Friend the Member for Basildon (Mr. Moonman) for giving me the opportunity to express my total agreement with what has been said from both sides of the House.
The Arab boycott is a reprehensible and disgraceful practice which should be denounced by the Government. The Government now have the opportunity to advise British businessmen how to deal with what is neither more nor less than an attempt to blackmail those who wish to deal with the State of Israel, which, in its turn, is the only democratic


country in that area, and with which this country has had excellent and friendly trading relations since its foundation.
Apart from that, the dangers of creeping discrimination leading out of the boycott are too obvious to need stressing. Once people are to be discriminated against, once companies are not to be dealt with because they have people on their boards who are Zionists, friends of Israel, or Jews, we have the beginning of a practice which could lead to the kind of discrimination which this country has been so proud to avoid in the past.
I hope that the Minister will give a clear lead to industry, to commerce, and to the British people on this subject of boycott, which is becoming more serious the more that the Arab nations take over our cities and industries.

12.40 a.m.

The Under-Secretary of State for Trade (Mr. Michael Meacher): My hon. Friend the Member for Basildon (Mr. Moonman) has, as always, presented his case very lucidly and very forcibly. I am very glad to have the opportunity to discuss this issue tonight because there can be no doubt that there is a very great deal of feeling in this country about it. In some quarters I think that it has generated some misunderstandings, which I hope to have the chance, briefly, to clear up.
As has been repeatedly stated by Ministers, in the House and elsewhere, Her Majesty's Government are opposed to and deplore all trade boycotts other than those that are sanctioned by international support and international authority. We wish to see our commercial relations expanding in all markets, but we recognise that our exporters have to deal with a situation in which certain countries require certain special formalities and documentation.
It would not be for the Government to direct or instruct firms to supply specific markets or to prevent exporters from providing whatever documents or declarations are required in respect of goods shipped to a particular country. To direct firms not to comply with requirements which are often part of the import regulations of the importer's Government could clearly bring to an end our export trade with those countries. This could be

dangerous for this country's future economic policies, and it would be damaging to employment at home. We cannot ignore these realities.
Thus I think that it must be for exporters to decide how they deal with the situation which they currently face in doing business with the Middle East. If choices have to be made, firms must decide their policy in the light of their own commercial interests.
Similar principles must govern any consideration of this question by the EEC, of which my hon. Friend made mention, as this would require the agreement of all the member States. It is relevant here that the EEC has signed or is in the process of negotiating a network of commercial agreements with many Mediterranean States, including both Israel and her Arab neighbours. The principle underlying these agreements is one of improving the flow of trade. The boycott is clearly inconsistent with this. While I do not rule out discussing the problem with our trading partners, the first priority must be a peaceful solution to the fundamental political problem.
As far as I am aware, Article 85 of the Treaty of Rome, to which my hon. Friend explicitly referred, concerns restrictive agreements between undertakings and decisions by associations of undertakings which may affect trade between member States. It has no application to steps taken by individual firms as a result of external pressures. Article 85 concerns abuse of market powers by undertakings in as far as they affect trade between member States. Again, it has no application to steps taken as a result of external pressures.
No facts have been brought to our attention to show that any relevant articles of the Treaty of Rome have been breached in this country. Of course, if an individual firm has reason to believe that there has been an infringement of Article 85 or 86 and can claim a legitimate interest, it is open to that firm to request that the suspected infringement be investigated by the Commission of the EEC.
My hon. Friend also referred to American legislation on the boycott. Her Majesty's Government see little purpose in adding to the already heavy burden of documentation placed on our exporters


by requiring them to report their dealings with the boycott authorities. After all, the United States' legislation does not appear to prevent American exporters from providing declarations required by Arab importers. It is merely the reporting of their dealings with the boycott authorities that is required. Again, we judge that it is best to leave it to the commercial judgment of our own traders.
Apart from these broad principles, however, there are considerable misunderstandings in some quarters over this issue. For example, it is not always understood that Iran, for example, has nothing to do with the boycott. It is not always understood that merely exporting non-military goods to Israel is in general compatible with a flourishing trade with Arab countries.
In that context I emphasise that officials at the Department of Trade are available to discuss with individual firms any problems that they encounter and to offer them their knowledge and experience. It is perhaps surprising that we often discover that firms have been about to act on the basis of a misunderstanding of the boycott.
I can place before the House a copy of a note for exporters which the Department has prepared and which has been circulated to member chambers by the Associated British Chambers of Commerce. In addition, the publication on Israel in the "Hints to Businessmen" series reminds readers to consult the Department if they have any doubts about the boycott.
My hon. Friend drew attention to the trade prospects with Israel and suggested that Government encouragement or inducement was necessary to ensure that it was fully exploited. Neither he nor other hon. Members need fear that British companies are unaware of the opportunities for exports to Israel. Last year, when Israel's total imports fell, our exports to that country increased to £237 million and we regained our position as Israel's second largest supplier after the United States. This year we have supported a mission to Israel of the London Chamber of Commerce and today has been British Day at the International Consumer Goods Fair in Tel Aviv where we have an official British pavilion.
There have been regular contacts between British and Israeli Trade and other Ministers. But for the current suspension of the normal arrangements for pairing, the Under-Secretary of State responsible for civil aviation and shipping would tonight have hosted a reception at our pavilion at the Tel Aviv Fair. We are in the final stages of setting up a United Kingdom-Israel joint committee to examine further ways of promoting exports in both directions. Neither the Government nor British exporters can be accused of neglecting this important market.
My hon. Friend also referred to the contracts for the Port of Haifa. Various firms that he mentioned have explained their lack of interest by existing heavy commitments abroad and my hon. Friend begged leave to doubt that reason. But it is substantiated by the reports reaching the Departments of Environment and Trade from many of the larger companies which are having to refrain from pursuing certain overseas projects, particularly in countries where they are not already well established. The loading of particular businesses, bearing in mind all the circumstances of their prospects in a particular alternative market, is a matter for a firm's own judgment. It is not an area in which the Government have the right or ability to interfere.
However, in that context I know that the House will be pleased to learn that earlier this week the National Coal Board signed a consultancy contract with the Israel Ports Authority covering the coal handling facilities to be installed as part of the development of Haifa port. In addition to being a valuable and important contract in its own right, the NCB's initiative goes some way to counter the criticism that British firms will not bid for Israeli business for fear of the Arab boycott.
There is a further point on the subject of misunderstandings, which also touches on the racial discrimination to which my lion. Friend referred. Newspaper articles which sometimes confuse the implementation of the boycott by the boycott authorities with the operation of the entry visa regulations of some Arab countries serve only to increase the misunderstanding and fears of British


exporters. I advise firms with specific problems to discuss them in confidence with Department of Trade officials.

Mr. Moonman: Will my hon. Friend give attention to my suggestion that it is necessary to go beyond private consultations with the Department and consider an inquiry, which can go into more detail and sift the evidence? In no other way would some of the people who approached me make the evidence available. There are misunderstandings because the Government did not adopt a moral posture. Despite what my hon. Friend said, there are still grave misgivings that companies should be in the forefront of war when the Government should be taking the lead. An inquiry might help.

Mr. Meacher: I am prepared to give a positive response to what my hon. Friend said, and to consider in depth the weight of the evidence, to see whether and how that might enable us to assist firms which might otherwise have difficulties, or whose fears might discourage them from proper trade relations.

Mr. Greville Janner: Meanwhile, will my hon. Friend make a clear statement that the Government condemn compliance with the boycott?

Mr. Meacher: My hon. and learned Friend made this point very strongly in his brief speech. I said at the outset that the Government strongly deplored and objected in every way they could to all trade boycotts not sanctioned by international support and authority. countries is not a trade question. The United Nations Declaration on Human
The issue of visas to British business personnel wishing to enter certain Arab

Rights does not apply to the criteria for entry into a country, and it would not be appropriate for the British Government to comment on entry visa regulations of another sovereign State. But a number of Arab States do not in any case require visas for British citizens. Most of the other Arab States simply require visa applicants to state their religion on the application form. Therefore, in most cases there is nothing to prevent a British Jew from travelling to most Arab countries if he wishes.. The final decision must rest with the individual in the light of the urgency of his business in the country concerned and his assessment of any risk he may believe to be involved.
My hon. Friend also raised the question of racial discrimination. We have seen statements by the boycott authorities that the boycott is directed not against Jews or firms owned or managed by Jews but against Zionists.

Mr. Greville Janner: There is no distinction any more.

Mr. Meacher: I admit that it is a very fine distinction.
Although it appears unlikely that discrimination of the latter kind falls into the strict category of racial discrimination, any complaint of discrimination in this country on grounds of race or ethnic or national origin will, if lodged with the appropriate authority, be investigated under the Race Relations Act. This is—

The Question having been proposed after Ten o'clock on Wednesday evening, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at five minutes to One o'clock.